Signs You're Stuck in a Cycle of Debt

Being in debt can create problems and may make it hard to get ahead when it comes to saving and investing. Do you think you might be caught in a cycle of debt? Read on to learn how to tell if you are stuck in the debt cycle. If you are, there are steps that you can take that may help you get out of an endless cycle of debt.

How to Tell If You Are Stuck Cycle of Debt

1. You are continually maxing out your credit cards

   If you repeatedly max out your credit cards, you are probably dealing with hefty interest rates. If you’re only making the minimum payments on your credit card, high-interest rates may keep you in the debt cycle.
   
   

   How can you stop hitting the limit on your credit cards? The first thing you will want to do is create a self-imposed limit of just 30% of your credit card limit. This may help you keep your credit card spending down and may limit your interest rate charges. Second, try only to use your credit cards in emergency situations. This may help you also keep your credit card spending down. 

2. You are living paycheck to paycheck

   Many people in the United States live paycheck to paycheck. If you are not making a lot of money at your job, then making ends meet may be an issue. Here are some ways that you can potentially live within your means and possibly lower your debt:

• • Take advantage of coupons and sales

  • Buy only what you need

  • Set a budget

  • Find additional sources of income
    

3. You are not saving any money

   If you are not saving money, then you may have problems dealing with emergency spending situations that might come up from time to time. Try to start saving a little bit every month. Even if you can only save $20 a month, you may be able to stay on top of future emergency spending situations.
   
   

   Over time, you may make more money at your job or career. You can use this opportunity to increase your savings, which may help you stay out of debt.

    

4. You are only making the minimum payments on your credit cards

   Credit cards require minimum payments each month. If you find yourself only making the minimum payments on your credit cards, you may have difficulty staying out of debt. You should try your best to pay more than the monthly minimum. Doing so might allow you to pay down your debt and get your financial situation under control.
    

5. Paying one debt with another line of credit

   Some people may try to control their spending by using one form of debt to pay another form of debt, essentially borrowing from one to pay the other. This is a dangerous pattern as interest continues to accrue, and will likely cause you to continue staying in an endless cycle of debt.

    

6. Getting a cash advance on a regular basis

   There may be several cash advance stores in your area. While these cash advance stores may be a convenient way to get money on an emergency basis, they may not be best when it comes to the regular servicing of your debt. Cash advances are another form of borrowing from “Peter to pay Paul.”
   
   

   Try your best to avoid dealing with cash advance stores when it comes to servicing your debt. This could help prevent dealing with a continuous cycle of debt payments and obligations.

    

7. You are continually getting letters from debt collection agencies
   If you are getting letters from debt collectors, you may have more debt than you can handle. There are some steps that you may be able to take to manage all those letters from debt collection agencies:

• • Ask the debt collector to provide proof that you owe money - Sometimes, debt collectors may try to collect a debt from you that you do not owe.

  • Make a counter-offer. Sometimes, a debt collector may accept a percentage of the money you owe. This may help you pay down your debt faster.

  • Seek debt counseling. An expert debt counselor may be able to help you deal with all your debt.
    
    

 Tips to Reverse Credit Card Debt Cycle

Here are some tips that may help you deal with your cycle of debt. Try one or more of these steps.

1. Start paying down your highest interest debt

   One of the first steps that may help you the most is to start paying down your debt with the highest interest rate. Doing this should help ensure you pay less interest overall. Once you have paid all of your highest interest debt, take that amount plus the amount of your next highest interest debt and pay it off. Keep doing this until all your debt is paid.

2. Get your spending under control

   No matter how much money you make, you might have trouble staying out of debt if you cannot control your spending. One way that you may be able to control your spending is by setting a budget.
   
   

   The key here is to spend less than you make. This should help you stay out of debt over the long term.

    

3. Create a long-term saving and investing plan

   One excellent way to help you possibly stay out of debt is to save and invest. You can start saving just a few dollars a month and then put that money to use in various investments. Over time, these investments may be able to build your wealth and keep you out of debt.
   
   

   Here are some investing approaches that may help:

• • Stocks

  • Bonds

  • High yield checking or money market accounts

  • REITs (Real Estate Investment Trusts)

  • Mutual Funds 

 With good spending and saving habits, you may be able to get out of or even avoid getting into a major debt cycle. This may help you enjoy a more prosperous life free of debt worries big and small.