Like a summer storm, financial trouble can happen without much warning. Perhaps you’re in financial trouble right now, and you have no idea. That’s why it’s so important to know and understand the most common financial warning signs of a serious problem.
Some people out there don’t realize that they are one “life-changing” event away from falling into debt. These people might make more than the minimum payment on their credit cards each month. They may even have some money left over at the end of the month. They could have a nice 401k set up also. However, the thing that will put them over the edge is the fact that they don’t have any savings built up. There’s no emergency savings fund, rainy day fund, etc. to help cushion the blow.
We see it all the time here, people who were making ends meet and didn’t think they had a debt problem or they were managing their money all wrong. Then, something big happens to them, like a job loss, major death in the family, major illness or injury, divorce, etc. They now find themselves in some serious trouble and falling into debt.
A growing number of families struggle with excessive financial obligations—you are not alone. It is important to recognize that the way you manage your finances in one area of your life can and often does spill over into other areas. Don’t be fooled into thinking your credit card problems or your lack of savings won’t affect your mortgage or car loan, because they most certainly will, especially if not dealt with swiftly.
There are many challenges that life may throw your way, which can leave your debt spiraling out of control. Whatever the reasons may be, the indicators below are a sure sign that you will benefit from free credit counseling.
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Warning signs that can help you recognize financial trouble:
1. Inability To Pay Bills On Time
When you fail to pay your monthly bills on time, this indicates that you don’t have enough money to cater to all your debts for that month. If you fail to pay one bill during the month due to an emergency forcing you to divert your finances, you can rectify the situation in the following months by clearing and settling the next bill in advance. However, if you continuously fail to pay the bills due to a lack of cash, this should serve as a warning sign that you need to fix a problem in spending. Failure to pay the bills has negative long-term impacts as you attract lateness fines and affect your credit history.
2. Making The Minimum Payment
You can take debt to pay for an emergency, education, or purchase items and commit to repaying the debt monthly. However, at times, you can have multiples debts running simultaneously, presenting a problem of repayment. When this happens, you could resort to making the minimum payment to ensure you meet the debt obligation of each debtor. The move increases the debt repayment period, makes the loans expensive, and indicates a lack of financial planning.
3. High Debt To Income Ratio
Your income should dictate how much debt you should accumulate for any given time. Financial gurus recommend that you should maintain a debt-to-income ratio of no more than 28%. The ratio means that all of your accumulative debt should amount to less than 30% of your total income. A creditors’ decision when giving out loans is based on this debt-to-income ratio. When you have a debt-to-income ratio above this, it indicates a financial management problem that you should address before it exacerbates.
4. Purchasing Everyday Items With Credit
You should only make use of your credit card during an emergency. Purchasing items through a credit card is expensive, as you have to pay a one-off access fee and interest. The amount charged is high, and you can use this cash to cater to other bills. If you realize you are left with no money and can only purchase items most times through credit card use, it’s high time you start saving to avoid financial troubles in the future.
5. Lack Of Emergency Savings
When you live on your paycheck every month, it becomes impossible to save any amount of your income. Lack of saving is among many warning signs of a dangerous financial position. Any unprecedented occurrence will force you to use credit cards to meet emergencies if you don’t save. If you don’t make any savings from your income, you should adjust your spending to commence making little saving for investment and meeting unforeseen circumstances.
6. Borrowing Money To Pay Bills
Everyone should make payments to cater for their bills in advance to prevent late payment penalties. When you borrow cash from friends, family members or use credit cards to pay for other debts, this indicates that you have a problem managing your finances. It would help if you enrolled in a debt management program that will assist you in making healthy financial decisions before accumulating more debts.
7. No Household Budget
Some people who are facing debt don’t want to face the problem head-on since they are worried about knowing the gravity of the situation. However, it’s important to know how much you bring in every month and how much you owe every month. You need to sit down and face the numbers. This can help you examine your financial habits. You may discover that there are areas where you can cut spending. You may also discover that you simply don’t have enough money to cover your expenses. In this case, you need to determine how to generate more income.
8. Dealing With Stress And Anxiety
Money can be the root of some serious mental problems, such as depression and anxiety. People may notice a serious difference in your behavior. You may seem irritable or stressed. Worrying about debt can have you up all night. When you wake up, you won’t be your best self in order to handle the situation properly. If finances are causing you to require mental help, you need to get to the root of the problem.
The financial lending institution and credit cards only lend to people to facilitate their immediate needs. People promise to pay them in the future with additional interest. When you seek financial support from lenders and fail to receive aid, you should overhaul ways of handling your finances. Developing a debt management program could assist you in repaying all outstanding debt and build a positive credit history for future borrowing needs.
9. Relying On Cash Advances Or Payday Loans
The practice of taking cash advances to meet your regular bills before the month comes to an end, should serve as a warning for a person to review their financial standing. Cash advances should only be used during an emergency as they attract high interest rates. Any good debt management plan will make room for savings. That’s because the world is unpredictable. You need those savings for when unexpected costs pop up. What are you going to do if you use all of your savings just to get you back on track financially? You need to ensure that you set up your finances so that you have enough to save money every single month. You should save for emergencies, your retirement, and miscellaneous needs. This should be able to cover you no matter what happens in the future, including future financial problems.
10. Lying About Your Financial Situation
You should not have to hide your finances from the people you love. You should be open about your situation. However, debt can be embarrassing. This can cause you to lie to your spouse or partner. When you lie, you are only putting more stress on your plate. It can ruin your relationships and even prevent you from getting the immediate help you desperately need. If you’ve been lying about your finances, that’s a clear indication that something is very wrong.
If you are reluctant to talk about your financial position with your friends and family members, that is the first indicator that you could be in a financial crisis. Most people have gotten a call from a bill collector at one time or another. However, you don’t want to constantly be dodging phone calls. It’s a bad sign if you have multiple debtors calling you to collect their money. If you let these go too long, the accounts could be sent into collections. Everyone knows just how bad this can be for your finances.
Some other financial trouble may include:
- You don’t have enough money in your savings account, or you don’t even have a savings account at all.
- You’re only paying the minimum monthly payment required on your credit cards each month because that’s all you can afford to pay.
- You are often late paying your bills, or you accrue late fees and/or over-the-limit fees often.
- You routinely spend more than you earn each month.
- Your credit limit is maxed out on most of your credit cards or pretty close to it.
- You have a shortfall in your budget instead of having a positive budget.
- You just had an unforeseen life-changing event happen to you, such as a major death in the family, a divorce, loss of income, major medical issues, etc.
- You skip payments on some bills in order to pay others or use cash advances on one credit card to pay off another one.
- You recently got turned down (denied or rejected) for a loan or new credit card.
- You spend more than 20% of your net income on your credit card bills each month.
- You need to refinance a loan to reduce your monthly payment because you can no longer afford to pay it every month.
- You need a co-signer on a loan because you’re seen as a high credit risk.
- Financing your vehicle for six years or more just so you can afford the monthly payment.
- If you’re just opening new cards because you’ve maxed out the other ones or are close to your credit limit.
- You’ve asked your parents and/or friends to lend you some money.
- You have put off important doctor visits or dentist visits because you can’t afford it.
- You are living paycheck to paycheck with no savings at all.
- You rely on money you don’t have to get by each month (credit).
- Your debt is so big that you don’t know the actual amount of just how much you owe.
Many people have experienced a rise in their debt due to COVID-19. The pandemic affected the everyday business operations, economy, and caused massive job losses all across the United States. As a result, most people fail or struggle to fulfill their debt obligations. If you recognize that you are experiencing any of the above signs, you should take the appropriate steps to fix your finances before the issue gets beyond your control.
If you feel as if you are stretched to the max financially, and have no breathing room in your budget, reaching out to a credit counseling agency can help you to create a solid plan of action for regaining your financial standing. The free credit counseling services offered at Advantage CCS can help you improve your financial stability. Working closely with a professional certified credit counselor will help you put your finances back on track while putting an end to annoying calls from debt collectors.
If you fall into a few of these early warning signs, then give us a call today! It’s better to be proactive and understand your current financial situation, then to wait for something to happen and have no options available. Call us at 1-866-699-2227!