While debt can be a natural part of many major financial purchases, too much can put you at great financial risk. If you’re not sure how to tell how much debt is “too much,” check to see if you fit the following criteria:
- Slowly Growing: Is your overall debt balance rising each month? If you’re accruing more debt than you can afford to pay down within a few months, you may want to put a pause on your borrowing for now. Examples include spending with your credit card or borrowing funds to afford a major purchase. It’s usually better to build a debt-hill rather than a debt-mountain! Remember, the funds we borrow accrue interest. This means that we will end up paying more in the end than we borrowed.
- What Is Your Credit Score?: A number of factors in our borrowing history affect our credit score. For example, if you’re carrying a large amount of debt from month to month or are opening new credit cards, these behaviors will be reflected in your score. If you notice your credit score has dropped over the past year, this is a good indicator you’re carrying too much debt. Set a goal of paying off your debt as soon as possible, in order to boost your score and create a stronger financial foundation.
- Check Your Financial Goals: Assess the amount you save each month. Are you working toward your goals for building an emergency fund or buying a house like you had planned? Or have you put a pause on your savings habits, so that you can barely make minimum payments to the debts you owe? It takes time to save up enough money to meet our goals for the future. Try to emphasize debt repayment, because the interest you are paying could otherwise be going toward your secure, envisioned future!
If you’re buried under debt, consider pursuing a second career to increase your financial stability.
To learn more ways to improve your financial life, visit the Syncis blog at www.syncis.com/blog/ .