Your financial life is important to your overall security and peace of mind. When your financial life becomes out of control, there always be warning signs. These warning signs may be the signal that you may need more powerful debt relief options such as bankruptcy.
Warning sign #1: Living paycheck to paycheck and it’s not enough
Life becomes difficult enough when you are living paycheck to paycheck. When you are no longer able to live paycheck to paycheck, it is a sign that your financial life is out of control. If you could no longer budget all of your expenses within the framework of your paycheck and income, you need to take drastic action. You need to look into options such as reducing your overall expenses or even filing for bankruptcy.
Warning Sign #2: Spending more than 30% of your income on servicing debt
Another warning sign that your financial life is out of control is spending more than 30% of your income on servicing debt. If you are paying more than 30% of your income towards credit cards or other high interest loans, your financial situation is likely becoming out-of-control.
Using a large amount of your income to service your debts can become a vicious cycle. Many times the debts are never significantly paid down. Usually your debt totals only end up increasing. In order to break this high-debt cycle, you may need to drastically change your financial set up. You may also have to file for bankruptcy.
Warning Sign #3: Everything You Own is “Financed”
If everything in your possession is financed, your financial life is likely way out of control. Mortgages and car loans are bad enough. If you even have other financed items on the table, you are likely going down a very bad road financially. This is because you are overextended. Very little of what you own was paid for with savings or cash. Such situations can quickly develop to where the payments to service the loans can no longer be afforded. In order to get rid of the debt obligations, you may need to sell some of the items or pay off some of the loans. If the situation is too severe, you may need to file for bankruptcy.