6 Signs You're on the Verge of Over-Indebtedness and How to Get Out of It 

THE over-indebtedness is a real and constant problem in people's lives.

According to the Consumer Debt and Default Survey, 7 out of every 10 people in Brazil have some debt and the other 3 have overdue bills.

In fact, the survey reports that 1 in 10 will certainly not be able to pay their debts.

Thus, the situation is very critical in this sense, because the number of families sinking into debt has been increasing exaggeratedly year after year, much of which is a reflection of the pandemic and consequently of inflation.

However, it is possible to identify the signs that you are in serious financial trouble, and from there, change your habits to get out of the hole and stabilize.

Continue reading and learn more about the subject!

Signs of over-indebtedness

At first, even with the not so favorable scenario, succumbing to the situation will not help at all. You need to understand what may be complicating your financial life.

Therefore, understanding the early warning signs will help you avoid reaching a point of no return. Let's look at some symptoms that indicate you may be entering a debt quicksand.

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1. Spending more than you earn or maintaining a lifestyle that exceeds your actual monthly income. 

The context has changed completely, the information has affected your income, the price of food, clothes, among other things, has only increased and the person continues to live as if nothing had happened.

In this sense, it is a serious mistake to try to maintain a standard of living that cannot be afforded, and it is a dangerous warning sign.

Looking at the short term, you might even catch a loan or use an emergency reserve, being able to maintain yourself in that condition for a very short period.

But in the long run, the person will not be able to sustain this situation, and may only be able to see what state their finances are in after they are up to their necks in debt.

So, be very careful not to fall into the temptation of buying things just because of the promotion or taking impulsive actions, which can get you into trouble.

2. Trying to work magic when paying expenses 

Things are so bad that month after month people have to choose which bills they will pay and which bills they will leave for later.

In this way, there are situations where draws are even made for expenses to be paid or for the amount available in the bank account.

People often think they are doing something beneficial, but what they are actually doing is paying interest and penalties for late payments.

Therefore, it is time to take new measures and survey the overdue bills and contact the bank to resolve this situation by negotiating and seeking another alternative.

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3. Choose to use your overdraft to pay your expenses 

THE over-indebted he can happen when you give in to the temptation of using the extra limit in your bank account to do some shopping.

In this sense, you will end up losing control, after all the value of special check is automatically discounted, and its purpose is to cover unplanned expenses.

It is worth remembering that the interest rates on this type of credit are much higher, so be very careful with this type of action.

4. Frequent installment payments of your credit card bill 

In principle, credit cards are very beneficial when used wisely and make our lives much easier.

Therefore, when card expenses exceed the available credit, there is always the option to pay the bill in installments.

But when this becomes commonplace, it becomes clear that you are losing control of your finances, and paying your bill in installments is like a loan that has interest.

5. Request credit repeatedly to pay for another 

In short, it is even feasible to exchange higher-interest debt for lower-interest debt.

However, this type of action must be taken very wisely, because when a person starts taking out credit constantly, this will lead them to over-indebtedness.

This occurs when earnings are insufficient to cover essential expenses and pay other debts.

6. Accumulate installments 

Nowadays, it is possible to pay for even small supermarket purchases in installments, and this is an advantage that helps people fit expenses into their budget. 

However, if this type of practice is not conducted responsibly, the benefit will become a serious problem for you.

This way, these small installments will start to accumulate and become a gigantic snowball.

How to get rid of over-indebtedness?

Here are some tips to help you get out of this situation that seems like an unsolvable problem. 

1. Recognize that you are over-indebted 

There are many people who are heavily in debt and are able to recognize that they are in a difficult situation.

For example, because they are ashamed of admitting they are in debt, they don't want to hand over a car with very expensive installments and they can't afford it. 

Furthermore, she doesn't want to stop eating at places that no longer suit her financial situation, among other situations where it's necessary to admit reality, but the person acts as if nothing is happening.

Therefore, accepting your true situation will hurt much less, and it will also be a step towards getting back on your feet.

2. Adapt your life break to your reality

Recognizing that you're in trouble, now's the time to adapt your spending and actions to your reality and determine how much you can actually spend.

That is, to avoid the over-indebtedness it will be necessary to live at a lower standard of living, so that the accounts balance at the end of the month.  

Therefore, review your expenses, avoid unnecessary and useless investments, talk to your family, and decide to eat and seek out entertainment that best suits your budget.

3. Build a emergency reserve

First of all, one of the main tips for organizing your financial situation or avoiding debt is to build an emergency fund.

This will help you be prepared for unexpected situations such as medical emergencies, car breakdowns, last-minute travel, and other situations. 

In short, you need to have a reserve that covers 7 to 24 months of your fixed and other day-to-day expenses.

4. Renegotiate debts

One alternative to getting out of the hole is to try to renegotiate accumulated debts, remembering that this action must be carefully analyzed so that it brings advantages and does not complicate your life even further.

This way, you can take advantage of debt renegotiation programs, seek guidance from Procon, and ultimately try to resolve or alleviate your situation.

Conclusion

THE over-indebtedness is a serious problem, but it is not the end, there are several actions and measures that the person can take, to avoid falling into this or to get out of it.

Therefore, financial planning and practical ideas are necessary in this regard, to avoid debt due to sudden and unnecessary actions.

Finally, if this information helps you in any way, don't forget to share it. Cheers!