That sounds like a pretty straightforward question, one that each of us could answer without much thought, and with a simple yes or no. It would be obvious to us if we were in financial trouble, right? Well, for some it may not be that obvious. There may be signs that even people who feel financially responsible may miss.
I think we can agree that if you get a foreclosure
notice in the mail, or are served with a lawsuit
filed by Mastercard, you are in financial trouble. But there are other signs, ones that are more subtle, that may also tell you that you are either currently in trouble or not very far from it.
The article “5 Red Flags That Show You’re in Financial Trouble” points out some things that we may not have previously considered to be dangerous.
Overdrawn on Your Checking Account
If this happens once or twice in a lifetime, I think we can all agree that it’s a temporary loan from the bank that came at a much needed time. If you find that you are constantly overdrawn, always in the negative, this is a serious issue. It may be an easy fix. You may just be spending too much because you don’t follow a budget. Or, your budget isn’t tight enough for the money you bring in and needs to be tweaked. Either way, re-evaluating your budget is an important first step in this case.
Only Making Minimum Credit Card Payments
If you find that you are paying only minimum payments to your credit cards, you are getting nowhere near paying down your debt. Minimum payments tend to go mostly toward interest and only reduce the balance of your account by very little each month. If you continue to use the card, raising the balance even more, not only doesn’t your balance decrease, but your minimum payment will increase. It’s a vicious circle and a hard one to break. If you switch to using cash, and only buy what you have enough cash for, this is a good start. But at the same time you need to increase your payments above the minimum if you want to see a dent in your credit card balance.
No Rainy Day Fund
It’s hard to fault anyone who lives paycheck to paycheck because the fact that they’re actually able to make ends meet on a monthly basis in this economy can still be a win. However, things come up that can’t be expected. Family members get sick, hours get cut, jobs are lost. Having a rainy day fund can make the difference between sinking or swimming. Even if it’s only a couple of month’s salary, it can still get you out of a jam.
You Only Pay the Important Bills
As stated above, living paycheck to paycheck is one thing. But it’s another to not even be able to pay all of your bills each month. If you are frequently paying the rent but not the electric because you have to choose between them, you may have to revisit your budget to see if something can be done.
Dwindling Credit Score
The lower your credit score, the higher risk you are to potential lenders. This means you’re going to be offered higher interest rate accounts than you would if you had great credit. This might not seem like a big thing now, but when your car dies and you need to go out and replace it, it will matter a lot more. A higher interest rate on an auto loan can make the monthly payment much higher. It’s easy to see why the above list contains red flags to financial problems, and a lot of the suggestions may even sound like great ideas. But if you’re buried under so much debt that you find that you are unable to implement any of them, it’s definitely time to get help. You may need to speak to a bankruptcy attorney to see if you may be able to get out from under all of the debt in order to move forward
, maybe even starting that rainy day fund.
At Greenwald & Hammond
, we offer a free consultation where we can discuss your personal situation and figure out what can be done to help. We can offer advice on how you can get out of debt. Contact
our office to set up an appointment for a free consultation, it may be the best thing you do to start 2012 on the right foot.
Submitted by:Kerry Hammond, Esq.