Are you managing your debt? Or is it managing you? If you're stuck in a money quicksand trap, you may not even realize at first that you're in a financial predicament, especially if you're sinking slowly and have been poorly managing your cash for a long time.1. You're spending more on your credit card than you're paying off. According to the National Foundation for Credit Counseling's 2014 Financial Literacy Survey, which surveyed 2,016 adults last March, about 1 in 3 U.S. adults admitted to carrying credit card debt from month to month. Approximately 15 percent of adults – more than 35 million – roll over $2,500 on credit cards from month to month.2. You're having trouble paying bills. It may be an obvious sign that there's a problem, but you still may not see it as a true red flag if you've been having trouble paying bills for a while. You may just see it as a sign that your salary is pitiful and your boss is a skinflint. That may be true enough, and if you aren't paying your bills on time, you certainly aren't alone: Twenty-four percent of Americans, according to the aforementioned survey, are constantly late with their bills. Still, if you're frequently paying late fees or getting burned by your bank's overdraft fees, that's generally a sign that you need to get your financial house in order before an emergency hits.3. Your retirement isn't being properly funded. It may not be troubling your bank account now, but it is a huge red flag for your future4. You're buying merchandise without putting much down. Have you ever driven a car away from a dealership without putting any money down or furnished your home while paying absolutely nothing? That could be a problem.5. You've created opportunities that could make you overextended. If you have a lot credit cards or lines of credit you rarely use, you could, in theory, end up spending a lot of money and getting yourself into trouble that way, but having those lines open isn't itself a bad sign. It's a sign that you have good credit, and your creditors trust you. Still, it's good to remember that if you aren't monitoring yourself, you could ultimately max out and find yourself buried in credit card debt. At least in that scenario, you have control over what may or may not happen.
Most programs are temporary, often lasting between 3 to 12 months. This provides a bridge through the period of financial difficulty, after which you are expected to resume regular payments or discuss a permanent solution.
Yes. If you default on a debt, a creditor or debt buyer can file a lawsuit against you. If they win a judgment, they may be able to garnish your wages or levy your bank account to collect the owed amount.
Paying a collection account does not remove it from your report, but it may change how some newer scoring models view it. However, for most common scoring models, the negative impact of the collection entry itself on your Payment History and Amounts Owed will remain until it ages off your report after seven years.
A financial shock is an unexpected, unavoidable expense or loss of income. Common examples include major car repairs, emergency dental work, a sudden job loss, a large medical deductible, or a critical home appliance breaking down.
The skills and habits developed through budgeting—intentional spending, planning, and delaying gratification—create a foundation for building wealth, investing, and achieving financial goals long after the debt is gone.
