Financial difficulty warning signs

Recognising the warning signs of growing financial problems can be a powerful first step to managing your finances through difficult times.

The important thing to remember is that you are not alone . However, what can set you apart is how you deal with it.

A first step to managing your finances through difficult times is recognising the warning signs that your finances could be in difficulty.

Following are 12 signs that you may be putting yourself in financial danger:

1) You’re only paying the minimum monthly repayment on your credit cards.Minimum monthly repayments are typically set at ridiculously low levels. In many cases, they can be as low as 2 ½ percent of the outstanding balance and once interest charges are added back in for the month, the minimum payment barely makes a scratch on what you owe. This means that if you’re only managing to pay this amount, it’s going to take you a long time to pay off your credit card debt in full. Not only that, but you’ll end up paying far more in interest before you clear your balance.

2) You are unsure on how much you owe your lenders. If you’ve lost track of how much you owe you’re probably overspending. Losing track of what you’re spending is not a good idea, especially if you’re spending large amounts. It indicates you have little or no control over your finances.

3) You’re borrowing to pay off your debts. Borrowing more and getting further into debt to meet your other debt payments is a dangerous path to follow – particularly if you’re using credit union loans and credit cards just to cover monthly payments on other debts, you could find yourself in serious trouble in the future. I call this the downward spiral of debt,  which will require a sustained and prolonged effort to recover from.

4) You’re spending more than you earn. Yes, it is possible to do this through borrowing. If you have no idea what your budget is and you’re spending more than you earn each month, or you’re not sure whether your salary is covering your expenses, you could be in serious trouble.

5) You are in negative income…you use your credit card to pay for everyday spending. If you regularly use your credit card to pay for necessities such as food or petrol and can’t afford to clear the balance each month, your debts will continue to build up and put more strain on your finances.

6) You are usually late paying your bills. If you regularly fail to make your bill payments on time, your cheques bounce, or you overspend on your credit card or overdraft, you’ll incur extra fees and charges from your bank. This will drive you further into debt and could also damage your credit rating. Late payment on bills will actually make a bad financial situation worse as you will usually incur penalties and charges…costs you cannot afford.

7) You don’t have any savings.  If you are unable to put even a little money aside for a rainy day, that can be a sign of trouble.

8) You are constantly turning to others for financial help. If you have been forced to turn to friends and family for financial assistance over the last 12 months, this could be a sign that you have a problem with your finances.

9) You fear conversations about money and personal finance…even among friends and family. If you fear conversations about money or finance with friends or family or have not been open or honest in certain circumstances, it could be due to the fact that you are afraid to compare your own situation with others. The fact that you have been afraid to even discuss your situation can be a sign that your finances are out of control. However, you could be making a bad situation worse by worrying about your problem.

10) You’ve been rejected for credit. This could be because you’ve already got too many credit cards – even if you no longer use them – or because you’ve missed payments in the past.

11) You are fearful of answering your phone or opening mail. You have taken to not answering phone calls or opening letters in case it may be a call from a creditor. Not all creditor calls are negative but if you fail to open and maintain a dialogue with creditors, it could lead to other problems such as creditors taking action to recover payment.

12) You’re constantly worried about your finances. If you are constantly worried or you are unsure of your financial situation, it is time that you took the first steps and look for the warning signs that could lead to personal financial difficulty.

If any of the situations outlined above apply to you, you’re probably feeling concerned. Debt can have a serious impact on your life, but the important thing to remember is that you don’t have to deal with it on your own.

Simply talking about your financial problems with your friends and family can feel like a huge weight has been lifted off your shoulders. What’s more, it’s a big step in helping you to face up to your debt problem.

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