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In too deep? Eight signs of debt overload

The benefits and conveniences of having credit lines or credit cards are enticing in today's consumer-driven world. But the bottom line is with these "benefits" come a large cost to the health of your credit score.

According to an analysis conducted by the Federal Reserve Board, Americans have tripled the national debt in the last two decades -- from $238 billion in 1989 to $800 billion in 2005. With almost 70 percent of households using credit to just get by, America is understandingly suffering from debt overload. The following are a few red flags to look out for when assessing your situation -- and determining if you are in danger of "debt overload."

You are unaware of your bills. If you don't know how much you owe, or even who you owe money to, you may want to consider pulling your credit report as a starting point to figure out what bills you do have. Then you can call the creditor or collector and let them know your situation. When consumers call and take the initiative to clear their debt, creditors often are more willing to negotiate and work out a compromise.

You begin hiding purchases. From time to time you may "forget" to inform your spouse or partner of your latest splurge, and that's OK. However, if you find this behavior routine, you should talk to your spouse or partner about it. Communicate with each other about each of your spending habits, and begin scheduling meetings to discuss your finances at least once a month so you can set goals (including paying off debt) and keep track of them. Both of you confronting the problem head on will be more beneficial in the long run, rather than trying to hide your financial downfalls.

You stick to the minimum. When your credit card balances are too high for you to pay off and you pay only the minimum on your cards on a regular basis, it indicates that you are over your head and your balances are higher than you can handle. You should be paying balances off in full each month.

You have very few dollars "on tap." If you only have a few dollars available, it usually means your take-home income is less than what you are spending monthly on your expenses. This includes household expenditures and credit card payments, causing a negative cash flow situation.

You max out. If most, or even all, of your cards are close to or at their limits, you are in debt overload. It is important to create a plan within your budget to work toward paying down the high-interest credit cards and make a conscious effort to reduce your debt. Set goals along the way and reward yourself by doing something fun (and inexpensive) as you reach these goals.

You juggle your credit cards. You are in danger of debt overload if you have so many cards you do not know what to do with -- that is, until you get another credit card offer and begin transferring balances. The next thing you know you are taking cash advances from one card to pay the minimum payments on others. Opening new accounts and shuffling your balances around to other credit cards can have a negative impact on your credit score.

You are not prepared. It is important to have an emergency fund with a recommended cash flow of three to six months of finances, depending on your financial status, to cover any unexpected expenses. Debt payments should not be the one thing keeping you from establishing this fund.

Try not to dip into your savings to pay for your monthly bills. You may even consider keeping your emergency fund in an IRA that you will not have access to without a severe penalty.

You toss and turn. A surefire way to tell if you are in too deep is that you spend many sleepless nights wondering how you are going to pay off all your debt. When you lose sleep over money issues, you know you need assistance.

Don't feel bad if you can't get your budget or your debt under control; it happens to millions of consumers. The first step is to admit you need help, which can be hard because we associate our self-worth with our financial situation. But stop beating yourself up, because you can fix it with some will power and motivation, and you can reach your financial goals. But you may need some help.

Financial advisers at Debt-Free America are available to discuss your budget and expenses with you at no cost. They have had years of training and education in the budgeting and credit card industry and are available as a free resource. They can help you refigure your budget and change your spending habits.

Symington is president of Debt-Free America, a nonprofit organization offering confidential and professional credit counseling, debt management programs and financial education.

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