Like cholesterol, I think that there is good debt and there is bad debt. Good debt, in my opinion, is debt that stems from things like getting an education (student loans) and mortgages, so long as they are affordable. Car loans are ok because people need transportation to get to work and public transport is generally not an option unless you live in a big metropolitan area. Even some credit card debt is okay and many people use theirs to trade in for rewards or miles, which can work out okay but the trick is to pay it in full every month to avoid interest. Debt should be planned, manageable, and budgeted. The kind of debt that is NOT OK is unmanageable debt or debt that grew out of control. I hate paying interest and avoid as best I can, especially on credit cards, but everyone has their own personal tolerance of debt and what they can live with and what makes their stomach hurt.
Robbing Peter to pay Paul isn't how its supposed to work. Getting into so much debt that you end up paying mostly interest with no way out is not a good way to live. There comes a point when acceptable, responsibly managed debt crosses the line. Do you control your debt or is your debt controlling you? Here are some warning signs that your debt is controlling you that you need to ask yourself if you consider this a normal way of life:
- You can only pay the monthly minimums on your credit cards
- You have accounts that have gone into collection
- You feel guilty if you have to buy new clothes or put new tires on your car, and worry about how you will pay for it
- You routinely transfer balances to other credit cards or have been denied credit
- You rely on credit
- Bill collectors are looking for you
- You are behind on a car, house, or rent payment
- You have stopped contributing to a retirement plan or have had to borrow against your 401k
- You are routinely borrowing money from friends or family
- Your credit cards are maxed out
- You are even thinking about a payday loan
- You don't have any savings
- Late fees and penalties pop up more often than not on your bills
- You are getting sued
- You put your head in the sand and have stopped even opening your bills or checking the mail
- Money problems are causing family fights
- You are feeling stressed and out of control due to your financial situation.
I am here to tell you that just because many people find themselves suffering from these symptoms- uncontrolled debt (like obesity) should not be considered acceptable just because it is prevalent. You owe it to yourself and your family to FIGHT IT and find the best solution for you to get out of it (hoping it will go away is not a viable solution by the way, you need a plan of action).
This is an excerpt from my new (free!) book about bankruptcy. If you are at your wits end with all of the debt and are wondering about filing for bankruptcy, make sure to request your copy now. We are also available for no obligation, no cost consultations in either our Schaumburg or Itasca office.