Have you ever felt overwhelmed by debts? What’s the best way to overcome issues with debts and money management in general? In our society, so many people are overrun by debts. “Debt overload” is any situation where your debt is in control of you, instead of you being in control of your debt.

Signs & signals of debt overload

• When you don’t know exactly how much debt you’re in:

It is important to always know your “Bottom Line”, or Net Worth: Total Assets (income & investments & valuable assets) - Total Liabilities (including all debts). Software like Quicken or Microsoft Money, or online tools like www.everydaywealth.com are an easy way to keep track of this daily.

• When you don’t know the interest rate of every debt:

If someone came to you and said that you could invest your money with them and get a guaranteed 10-25% annual return on your money (with no chance of losing the money), you probably would not hesitate to invest, right? Well, debt is like negative investment. You are guaranteed to PAY an extra 10-25% annually on the money you have borrowed. And this comes right out of your “Bottom Line.” Make a list of debts with their corresponding interest rates and see if you can switch the debts with higher interest rates to lenders with lower rates. Make sure to make extra payments to the lenders with the highest rates so that you can clear these debts first.

• When you can only make the minimum monthly payments on your debts:

The minimum monthly payment is designed to keep you in debt and provide the lender with an excellent investment return at your expense. ALWAYS pay more than the minimum, if at all possible. Pay back the debt using the method above, targeting the lenders with the highest interest rates with your extra payments.

• When you are having trouble making the monthly payments:

It happens to everybody. It happened to me a long time ago, before I learned to manage my money. The worst thing to do is feel upset and put your head in the sand. I know what it feels like to dodge calls from creditors– it used to cause pains in my stomach every time I heard the phone ring. The first thing you have to do is follow the advice in the first two points above: Calculate your “Bottom Line”, and list every debt with the corresponding interest rate. Knowledge is power. Once you have that knowledge, you have options including debt consolidation, credit counseling, and finding creative ways to increase your income. But you have to face the problem in order to solve it.

• When you can’t remember what it is you’re still paying for:

Basically, there are two kinds of debt: good debt (which would be to borrow money at 5% and then invest it for a 15% return), and bad debt (which would be buying expensive items on credit cards and then just paying the minimum monthly payments). Good debt adds to your “Bottom Line,” and bad debt subtracts from it. I used to run up my credit cards with lots of things like dinners, movies, clothes, CDs and other impulse purchases, and then a year later, I’d be still paying the bills and I couldn’t even remember what it was that I bought. If this is your case, put the credit cards away for awhile and pay down what you owe now first. Ask yourself why you even need all the “stuff” you’re buying. What’s going on inside yourself every time you pull out that credit card?

The MOST important thing to understand when analyzing your debt situation is yourself. What is driving you to spend more than you make? In order for me to turn around my financial situation, I discovered that I really needed to overcome a deep lack of self-worth (in my case). I was trying to fill an internal void with “things.”

So, no matter how much money I made, I would always remain in debt. And, once I was able to change internally, accepting and loving myself as I was, my financial situation changed dramatically. Ancient wisdom says, “As within, so without,” and in my experience this is definitely true in examining one’s relationship to debt and money in general.

Learn more about increasing wealth and abundance through improving your level of consciousness in the breakthrough book, 360° Success.

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This entry was posted on Wednesday, March 7th, 2007 at 3:53 pm and is filed under Money, Happiness and Self-Worth, Self Improvement. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.