The following is a guest post.
Research has shown that for some people, spending money can be as addictive as alcohol or drugs. As with these addictions, the first step toward taming your problem is realizing you have one. Watch for these five signs.
1. You spend more than you earn
This one can be a bit deceptive. Of course, if you can't keep up with your bill payments every month, it's pretty clear you are spending more than you have.
However, you may still have a spending problem even if you are keeping up with your payments. If you are only paying the minimum payment every month and your debt keeps growing, it's likely you have a spending problem.
2. You have a house full of things you don't need or use
Do you have a closet full of clothes and shoes you never wear? Do you buy fancy appliances that you rarely, if ever, use? If so, you probably have a spending problem.
Whether your overspending is due to impulse purchases or just simply because you can't pass up a deal, even on something you know you don't need, a house full of stuff you don't need is a telltale sign.
The good news here is that you may be able to sell some of this stuff to help pay off some of your debt.
3. You avoid looking at your bills
If you simply look at the minimum payment due on your statement each month and write out a check, you may have a spending problem.
This type of behavior means you are avoiding the truth about how much you owe each month and how much you are spending.
The thinking is that if you don't know the details and depth of your problem, you can deny you have a problem. But that's not going to make it go away.
4. Your friends and family tell you that you have a problem
Perhaps you have a nosy aunt or cousin who can't mind their own business. If they tell you that you have a spending problem, it may be something to shrug off.
However, if a trusted friend or loved one, such as your brother or mother, express concern about your spending habits, it's probably something to listen to, especially if it's coming from more than one person.
5. You've got collectors hounding you
If you have accounts past due and your creditors are calling you and sending you letters, that's a very good indicator that you have a problem.
At this point, it's no longer something you can ignore and if you don't take action to get a handle on your spending and debt, it's going to do long-term damage to your credit.
A credit counseling firm can help you with budgeting and counseling on how to reduce your spending and it can also work on forming a Debt Reduction Plan to help you pay down your debt.
The Debt Reduction Plan is similar to the Individual Voluntary Arrangement, or IVA that is used in Britain.
An IVA is a plan negotiated with unsecured creditors for repayment of debt. The IVA is a bit more formal than a debt reduction or debt management plan. The IVA is usually with a group of creditors, while a debt management plan can be negotiated with just one, but both the IVA and the debt management plan have the same goal and that's to keep you out of bankruptcy.
However, neither an IVA nor a debt management plan will give you long-term relief unless you change your spending habits.