I lived in denial about my debt for many years and when I look back, I can see now that there were several red flags or warning signs that my debt was totally out of control. I didn’t see the signs at the time.
The first red flag that I can think of was how I felt a rush of happiness at the thought of buying something new – it didn’t matter to me at all that I’d be using my credit card to do so.
I remember several occasions when I’d be at work and a friend would suggest a night out at the end of the week. My first reaction would be to mentally scan my wardrobe for something to wear. Usually, that process would end up in a desire to purchase something new and then after work I’d stop at a nearby clothes store on the way home to get something, just for the occasion.
Another alert that I really should have paid more attention to was when I ran out of money (and maxed out my overdraft) before payday and had to pay for food shopping on my credit card. When things were really bad financially, this would happen at least once per month. Now when I look back, I know this was such a dangerous situation to be in.
Possibly the most worrying sign that my debt was headed straight for the disaster zone was that I didn’t give it much thought at all. It was always “there”, appearing in the form of statements through the post every month but for a long time, I ignored it completely. I set up minimum payments by direct debit and just put it to the back of my mind. To be honest, it didn’t really register to me for ages that I would actually have to pay the debt off in full!
Why it’s worth checking on your debt situation right now
Many people tend to let their debt problems go unnoticed until it’s too late and they are forced to deal with them the hard way. In the UK alone, the average debt in some regions is over £18K, according to new data from PayPlan.
Other key facts arising from the research (based on customer data from 2015) was that the average age of people seeking debt help was 43 and there was around a 50 / 50 split between males and females seeking debt help.
It’s not just frivolous spending that can cause debt, it can occur for a variety of reasons, such as a loss of job or financial emergency. Whatever the reason though, the earlier a debt problem can be recognised, the more chance a person has of getting their finances under control quickly so they can get back to living their lives.
Along with the new debt statistics that PayPlan has provided, they have also launched a free online tool called Diagnose Your Debt. I’ve checked it out and it’s quite useful for giving yourself a quick overview of what kind of situation you’re in with your own debt.
To use the tool, you’ll just need to select yes or no answers to 10 questions about your debt. The tool then calculates whether you’re managing your finances well or whether your debts are getting out of control. Each answer points to further help and advice on the PayPlan website. (For info, PayPlan offer debt advice and help for free to people in the UK).
Confronting debt is the first step to take
I didn’t know the extent of my own debt properly until I was forced to deal with it. I was too scared to add up the amount I owed until I had no choice anyway. Facing up to debt is a scary prospect.
But like all things scary, the fear of debt often lies in the unknown. Once confronted, debt can be managed and the fear will subside once you know what you’re dealing with.
Have you experienced any red flags when it comes to your own finances?
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28 Comments
I used to get scared to face my debt before. I always think that I can’t pay it anymore! Until one day, I realized that you can’t escape the reality and I need to solve it.
Clarisse @ Make Money Your Way recently posted…Blog Income and Expenses, February 2016
I used to pay minimum payments but not really think about my debt. Then I realized I would be paying it off for the next 10 years (at least) if I kept going at the rate I was going. Now I’m actively trying to get rid of my debt asap and it’s a fun game to see how much money I can put towards it each month. The “Diagnose Your Debt” tool says I’m debt savvy! lol that made my day!
I agree with Clarisse – debt is not really inescapable. For most folks, it doesn’t really hit them until they get into a situation where there is no real way out of the mess they created other than to face the debt head on!
Derek @ MoneyAhoy recently posted…Is Renting a Luxury Apartment Worth the Extra Cost?
Exactly Derek – I think there’s always a way out of debt, as long as a person doesn’t continue racking up more debt!
There were really red flags I encountered in the past years. These flags just made me realize that debt could be handled and managed once I was willing to do it especially with the help of a plan. One thing I should have done earlier was that I should have looked for a means to minimize debt.
Hindsight is a beautiful thing Jayson – addressing debt now is better late than never though. 🙂
Hi Hayley,
Yes! The signs were always there and they sit there and smirk at you (at least I like to think so). I think in order to diagnose the problem there has to be a mindset shift. You have to come to the realization that hey, this is not cool to run out of money before payday. Or it’s not cool to have to rely on credit to pay for groceries…I think once that realization occurs, you’ll finally get it. Hopefully for many out there who are in these situations they will realize it before hitting rock bottom. That was my point of realization and it’s not fun.
Latoya S recently posted…How to Save for Unexpected Expenses
I think many people do realise the extent of their debt when they hit rock bottom. But I like to think that anyone can come back from rock bottom even if things are really bad!
This sounds all too familiar. I was in a similar situation where I would totally ignore my debts and keep living my life as if everything was fine financially. I was in denial and kept ignoring all the red flags. I am sure there was a lot of them!
Luckily, it is all in the past. Now that my debts are paid off I can genuinely enjoy every purchase I make knowing that I have paid cash for it! It still makes me very proud although I have been debt free for over a year now! 🙂
That’s good to hear that you’re still debt free Eva (although I would never have doubted otherwise) – I remember when you paid your debt off – a great day!
Debt got away from me too and that’s why I’m on the situation I’m currently in. It is an unfortunate thing and I wish someone had helped me see the problems before it got to the point it is now.
You’re doing great Tyler – you’re addressing it now and you’re working really hard to get out of debt – I’m sure it won’t be long before you see some good results!
I think you’re right that one of the worst signs is that you don’t think about your debt at all. Last year I took on some temporary credit card debt (at 0% interest that will be paid back within a few more months) and it’s definitely something that’s at the forefront of my thoughts. In the past when I had credit card debt, I felt like it was just part of life, not something that needs to be addressed ASAP. I’m glad that I’m in a place now where I have concrete plans to deal with my credit card debt and to stay away from it in the future.
Gary @ Super Saving Tips recently posted…Keys to Surviving a Personal Financial Disaster
When you start to feel like debt is a burden, it’s actually a good thing, because at least it’s being noticed! Glad you have your debt under control Gary.
I love that you noted the rush you get from buying things as the first warning sign! The emotional connection to buying things can be so hard to break.
Definitely! Nowadays I get a rush from saving money lol!
Over here medical debt is huge. I’m actually fighting a bill myself over something the billing office didn’t put through to insurance properly. It’s a nightmare.
FF @ Femme Frugality recently posted…Whetstone Workgroup Virtual Tour
Oh no, sorry to read this Femme! I shudder at the thought of medical debt, it seems so unfair to get into debt for something that is beyond your control. Really hope you get the bill sorted soon.
Not knowing your exact debt amount is a huge red flag in itself I think. I should know since we’ve been there. What really struck me was calculating our ages when we would be debt free if we would do nothing but making the minimum payments. That would be the age on which I envisaged us being free from financial sorrow, not struggling to make ends meet. Only on that moment did I explore the possibilities of making early payments (I didn’t even know how to do that before).
In my defense: The calculator says I’m handling my finances well today 🙂
Mrs. CTC @FromCostToCoast recently posted…Financially Savvy Saturdays 135
I’m glad that the calculator was on your side when it came to your finances Mrs CTC! I never did calculate our ages for when we’d be debt free if we only made the minimum payments. I was totally ignorant to debt at one point!
Debts are part of life. I just accept that it comes and goes and I have a choice whether to have it or not. So what I do is that I minimize debts in every way possible and I have the feeling of being in the rut of debt.
James recently posted…Getting Ahead By Mixing With The Right People
Well, debt doesn’t have to be a part of life James – like you say, it’s usually possible (but not always) to have a choice about whether to get into debt or not.
My big red flag has come recently when my hubby lost his job. I thought I was doing well, as I was paying over my minimum payments, but in reality I could have afforded way more. We’ve got no real emergency fund, so now money is much tighter than it could’ve been.
In the past I’ve managed money passively – now I’m set to actively manage my finances. Even on a single income, we’ve found we can afford to overpay debt which is great news. And we’ll keep this up once Hubby is back in work.
I’m sorry to read that your hubby lost his job Nicole – the fact that you can live on a single income is great though and will stand you in good stead when he returns to work!
We all really do need to face the fear and embrace our debt fully, with eyes wide open! And the sooner the better! I hope to be out of debt by 43, not just starting! I wish we had a similar tool in the US, as this one sounds interesting!
Erin @ Stay At Home Yogi recently posted…Quarterly Goals Review #1| Is 2016 Better?
I wish you success in your mission to become debt free Erin!
I had a very early lesson in dealing with debt, starting from age 17, so unlike most people, I had to come to accept that sometimes, some debt is acceptable if you know what you’re doing. We could never ever own in the SF area without a mortgage, unfortunately, since we’re not part of the SV dotcom crowd, so it’s ok that we have that loan. Otherwise, we’ve stayed on top of our credit card use (never spend more than you can pay, of course) and will be counseling our kiddo on student loans quite early on so that ze knows what ze is choosing if there’s an expensive school in hir future.
I always find that it’s a HUGE red flag when someone talks about debt like it’s inevitable and there’s no way around it. That usually means that they’re not willing to consider alternative choices, or that there IS a choice that involves NOT choosing debt.
Revanche recently posted…Unfinished business: things weighing on my mind
I used to be that person who talked about debt like it’s inevitable! Definitely a red flag warning. Sounds like you’ve got things under control with your debt which is great!