Debt Counselling: Signs That Could Indicate a Looming Financial Crisis
Debts can sometimes be very perplexing. Today, you may believe that you’ve been perfectly managing your finances, but fast-forward to just two or three months, and suddenly, you’re contemplating bankruptcy. Surely many people have heard the advice “manage your debts” or “watch your credits”, but when you’re faced with a growing problem that you didn’t even know you had, “managing” can seem impossible. Here are a few tips to help you recognize the early signs of an incoming debt problem, and how to avoid them.
1. No Savings – When your paycheck is just enough to make ends meet each month without any savings, then you are already in danger of accumulating debt. Imagine a scale that is perfectly balanced and that you are standing in the middle of it; any extra expense will immediately tip this scale in favor of your debts, until things snowball out of proportion. A simple parking ticket, or repair expense may be all it takes, so make sure to set aside even a small amount for these extras.
2. Frequent Borrowing – The problem with borrowing money is that you’re promising to pay the lenders off with something that you don’t have yet. What then would happen if you receive less money than you have been expecting? Always looking forward to your next paycheck is not a healthy financial practice. Limit your expenses according to how much you have at present, and don’t count money that you don’t have yet.
3. Paying Minimums – Paying only the minimum on your credit card means that you are unable to afford the things that you have bought. If you seldom use your credit card, you can slowly pay off your balance; however if you rely on the same card to pay for your groceries and other necessities, your debt will surely accumulate.
4. Applying For Another Credit Card When You Still Have Debts – Credit cards don’t magically give you extra money, they just increase your spending capabilities; and when your spending habits exceed your income, you simply accumulate more debts.
5. 10% Rule – Credit card balances should not exceed 10% of your income. While exceeding doesn’t necessarily place you in financial danger, it limits your capability to respond to emergencies.
Unmanageable debts can be avoided by responding appropriately to these early signs. Cutting down on some expenses or seeking professional help are highly encouraged once you notice these signs. Victoria, BC residents who are burdened with financial obligations should seek debt counselling from debt relief specialists like those at 4 Pillars Debt Consolidation & Credit Rebuilding. These professionals can come up with the ideal program that will help make debt management achievable for each case.
Do You Need Help From a Credit Counselor?, money.usnews.com
Early Warning Signs of Debt Trouble, cbsnews.com
Warning Signs of Debt, industry Canada