Most Americans are in debt, either with house payments, car payments, credit cards, medical bills or a combination, according to the American Debt Advisor website. About half of credit card carriers have a balance of at least $1,000, and about 10 percent have a balance of $10,000 or more. The fundamental issue about being in too much debt is that you are spending a lot of your money paying for goods or services you have already received, rather than saving or investing that money for the future.
Debt Payments Are Too Much
If your debt payments are too much for handle, you likely do not have enough money leftover to pay your regular bills and expenses, like utility bills or housing costs. If you are late or miss making payments, your credit score can take a hit, and you can fall deeper in debt with past due bills and late fees. Also, if you miss a few mortgage or rent payments, you are at risk to lose your home to foreclosure or getting evicted for non-payment. Too much debt can have severe ramifications on your personal and financial life.
No Room for the Future
Too much debt also affects your ability to save and plan for the future. Retirement may seem like a long way away, but you need to start planning and saving for retirement as early as possible to have the most money and security when you are older. Also, you should save for your kid's college education or for unexpected emergencies like home or car repairs or medical issues. However, if your debt payments are sucking up all your money each month, you have little or nothing left to save. How much you save depends on your age and situation. According to Monster, if you are 25, you need to save about $3,600 a year to reach $1 million by age 65 with an 8 percent return on investment. But, if you are 50, you need to save $34,000 a year to reach the same $1 million mark.
Other Financial Issues
Besides affecting your ability to save and invest, too much debt causes other financial problems. A high amount of debt reduces your credit score, which in turn affects your ability to get approved to buy a house or a car. If you wish to make home improvements or refinance your home for a better interest rate, you will have a harder chance of getting approved for a personal loan or refinance because of your debt.
Health Issues
Too much debt also causes health issues for many people. You might have lower self esteem due to your debt, which affects your personal appearance, lifestyle and daily attitude. Also, too much debt causes stress, which in turn can lead to physical illness or even a heart attack. You might find it harder to sleep because you are so worried about the effects of your debt, which is also bad or your health. Finally, too much debt can lead to issues with your personal relationships. You might fight with your spouse more, or stress out in social situations because you cannot afford to have dinner or drinks with friends.
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