The biggest sign that your debt is spiraling out of control is when you have to decide which of your major bills you are going to pay each month – in other words, you can’t pay all of them. If you reach the point that you are juggling minimum balances on a couple of credit cards, plus your cell phone bill, your cable bill, and your rent, then you have a problem.
You simply have to get a grip on your spending habits if you are finding that you ever need to skip the payment on any utility bill or credit card minimum payment. Ever.
You start by looking at what you are spending, and cut out some things. Maybe it’s cable TV or the health club (which you never visit anyway). Maybe you have to stop going out for drinks 4 nights a week at $50/night. Maybe you tell yourself you can’t buy any shoes for six months. Whatever it is, you have to stop your spending immediately.
Then, if you build a little breathing room, you can develop a budget that tracks where you are really spending your money. You might be surprised to find out where your dollars go. Almost everyone has expenses that he or she doesn’t think about, and people in debt usually have a lot more of them. After you figure out your spending patterns, you have to rank you preferences on spending, and start cutting out things from the bottom of the priority list. Don’t stop until your spending is at least 10% below your income. And then put all that extra money towards eliminating your debt – starting with the high-interest credit card debt.
You will sleep better at night and live a longer, happier life – I guarantee it.