QUESTION: How to know that your debts are under control?

A person's financial stability is determined not so much by the absence of debt as such, but by the ability to manage it competently and control the credit load. You can tell that your borrowing obligations are under absolute control and do not threaten your well-being by a number of clear diagnostic signs.

The main indicator of control is the complete absence of overdue payments and penalties. If you make all monthly payments ahead of schedule, a few days before the write-off date, and you never experience technical or financial delays, it means your cash flow is organized correctly.

The second important criterion is that the total debt load is within a safe range. In financial practice, it is believed that servicing all loans should take no more than thirty to forty percent of your regular monthly income. If this norm is met, you have funds left for living, development, and entertainment.

The third sign is the presence of a clear, detailed plan for the early or scheduled repayment of each loan. You know exactly when you will close each specific debt, see the schedule for reducing the principal debt, and understand the general picture of your financial journey.

In addition, control over debts is indicated by the simultaneous formation of savings. You do not direct your last money toward paying off a loan to the detriment of your basic needs and building a safety cushion. On the contrary, you know how to balance between paying off obligations and replenishing reserve accounts, while new debt obligations either do not appear or decrease with each passing month.