Your debt payments exceed 33-40 percent of your gross income; you only pay the minimum due on accounts instead of being able to progress toward paying them off; you use one credit card to make payments on other ones; your indebtedness is staying the same or getting worse; you put off one bill to pay another; you are past due with basic expenses like rent and utilities; you apply for additional credit cards because you’ve reached the limit on your other ones; you get advances on paychecks; you tap your savings for everyday living expenses. Also, ask yourself this – Is your debt so great that your budget couldn’t handle a crises (sudden new expenses, sudden loss of income).
To avoid looking into the possible black hole of your pocketbook, you stay out of debt by being frugal. You look at how much money you can spend, and you don’t spend more than that. Keep a cushion, enough to put away to carry you through a couple of years. People are only human, and financial mistakes will happen. In so being, financial failure will be periodic and inevitable. In light of this, have a set financial plan in place, so when you are short on money, you will have the resources to fall back on. Recognize the expenses you do not need. You will subseqently be able to meet your family’s needs and also be that much closer to your family’s financial goals. Much of your stress level and anxiety over your financial situation will be alleviated, thus giving you peace of mind and a larger bank account.