10 Tip-Offs You're Heading for a Debt Disaster

Like most of life's major problems, a debt disaster doesn't happen overnight. There are clear warning signs that crushing debt could grow out of control.

Here are 10 Tip-Offs that you're heading for a debt disaster. See how you score.

1. Your bank account is consistently overdrawn.

If you keep getting those thin envelopes in the mail from your bank telling you that your checking account is overdrawn, it's time to regroup and find out why you're not keeping up.

Tip: First, stop the bleeding. Ask your bank for overdraft protection for your checking account. But don't stop there: Track your expenses and find out why you've got bigger withdrawals than deposits.

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2. Your credit card balances are rising.

Compare the balances on your credit cards from six months ago with your balances today. Are they bigger now? If so, why?

Tip: While periodic fluctuations in your loan balances are normal, if they're consistently rising, you've got to stop, examine your spending and find out why.

3. You're only making minimum payments on your credit cards.

You'll never get ahead by borrowing money at 15% on your credit cards every month and taking years — even decades — to pay them off. Paying interest on purchases translates into paying more for the things you buy. That new jacket you bought for $80 will end up costing up to $240. Do that long enough and you'll go broke.

Tip: ALWAYS pay more than the minimum. If you can't, you're likely already heading toward a debt disaster. Talk to a credit counselor.

4. You and your partner are arguing about money.

Money is an emotional issue. It sometimes causes a power struggle between partners who have different ideas on how money should be handled. If you and your spouse or partner are haggling over bills more than usual, it's probably because your bills are higher than usual.

Tip: Agree on a budget and a spending allowance, if necessary. Then stick to it. And if money is an issue, communicate about it more often, not less often.

5. Your savings account is busted.

Money experts agree that a savings reserve equal to half your annual salary is mandatory to ride out rough economic times, like the loss of a job or a serious illness. If you don't have any money at all in your savings account, it's time to re-examine your budget and see where your money is going every month.

Tip: When you get paid, pay yourself first. Use automatic withdrawal to take 10% of your check and stash it in a savings or money market account.

6. You're juggling your monthly bill payments.

If you're applying selective reasoning to your monthly bill payments ("Hmmm — we'll pay the phone bill this month, but skip the cable bill") then you're in over your head financially.

Tip: Lose the cable and any other luxury item on your "to pay" list. In tough times, stick to the staples: home, car, groceries and utilities. You might not think about it, but 20 years ago, nobody had an Internet bill or a cell phone bill. Cut out everything until your income is greater than your out-go.

7. You don't know how much you owe.

You undoubtedly know how much you make. Not knowing how much you owe — especially not wanting to — is a sign that you're burying your head in the sand.

Tip: Pay as much attention to what you owe as what you make. Don't keep your debt out of sight — or out of mind.

8. You're keeping secrets.

If you're unwilling to share your spending with your spouse, that's a sure sign you're afraid of trouble ahead.

Tip: Come clean. Keeping debt a secret won't improve your situation. But it will keep you up at night.

9. You've got a credit card collection.

There's only one reason to keep a full deck of credit cards in your wallet — because one or two isn't enough.

Tip: Even allowing for specialty and cash-back cards, you don't need more than three. Pay off the rest and close the accounts. And when you close an account, do it right.

10. You're near the limit on your credit cards.

Credit cards should be for convenience only, not as the source of a continual high-interest loan. If you're using more than 30% of the available balance, you could be hurting your credit score and heading for a problem.

We hope you're not experiencing too many of these disaster signs. If you are, however, now's the time to take control. First step? Sit down and look at exactly what you have, what you owe and where your money's going. Then map out a written plan to reduce your debt. If you’re in over your head, you can find free help at any of these sources:

National Foundation of Credit Counselors

Association of Independent Consumer Credit Counseling Agencies

Association of Credit Counseling Professionals