You can say that you have over-indebtedness when you can not pay your debts more, your basic needs and other responsibilities are endangered.
How to beat overdraft
These types of situations can remove sleep to more than one and generate constant stress. We have a number of tips that can be very useful to avoid reaching this point.
You can say that you already have an over-indebtedness when your income is not enough to meet your payments.
Many people believe that ignoring the problem will make it not get much bigger. What they do not know is that by leaving debts in the third place, it will only make them grow bigger and then make them much more difficult to pay.
In addition to insufficient income to meet their responsibilities, there are other reasons. Some of them could be unemployment, your expenses increase over time, you have had a health emergency, you make compulsive purchases or you do not pay your credits in time and cause more interest to be generated.
The root of all problems is mismanagement of your money. Lack of financial education causes people to turn to financial institutions for help only when they are over-indebted.
Many times we believe that owing up to $100,000 is when a level of over-indebtedness is reached. But in truth, you must have total control of your finances so you can avoid getting to this point. With a control of your finances, you will be able to know what your strengths are and what your weaknesses are.
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One of the most common tips given by financial experts is rule 70-30. This rule is to designate 70% of your income in the payment of basic needs and expenses. The remaining 30% is used to pay off debts. That is why when debts exceed 30% of their income can be said to have a level of debt overhang.
If you have already realized that you have a level of overpayment then you should look for different options that will help you overcome it.
No doubt one of the main reasons you have reached this level of debt is because you have no control over your finances. A budget will help you know where your money is and how you spend it.
You will know where you can make cuts to be able to spend that money to pay your debts. Without a budget, it will hardly have been able to save over the years, money with which it could have faced those debts.
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Even so, it is always advisable to have savings no matter what your level of income or indebtedness.
All these situations should serve as lessons to prevent them from recurring in the future. Do not detract from the small expenses that are how your money runs away without you noticing. Many times you do not even end up recording these expenses in your budget.
Remember that all rules and economic advice can vary according to the lifestyle of the people. They serve only as a guide, you are able to modify them to your needs.