You wouldn’t think a financial crisis could creep up on anyone, but it’s amazing how quickly you can lose your grip, especially if you are already close to the edge. Here are six big red warning flags which signal you need to get your finances under control.
You are making the minimum payments or less.
As I’m sure you already know, only doing this will take forever and a day to pay off the balance on your credit cards. If you haven’t already, use an interest calculator (Moneysavingexpert has a good one) to see how long it will actually take you, and how much it will cost overall in interest. If you’re not managing to cover the minimum payments, you are already in a debt crisis and should skip to the end of this post.
You don’t know how much you owe.
You hide all your credit card statements unopened in the back of a drawer, you don’t know your online banking password, and you would probably estimate your total debt at about 30% lower than it actually is. But you can’t take control until you have the full picture. As painful as it is, gathering up all your paperwork and figuring out exactly what you owe is a crucial step to regaining the upper hand. Yes, it might be a big ugly figure, and you might cry, but at least then you’ll know that number is only going to get smaller from here.
You are suffering chronic stress and sleeplessness because of money.
Money worries can really grind you down both emotionally and physically, so it’s really important to keep taking care of yourself. I know it sounds like a platitude, but remember it is only money, your health is what matters. Not getting enough sleep can make manageable problems seems insurmountable. I can’t sleep when I’m worrying about things – herbal tea, bedtime yoga, and valerian tablets have all worked for me in the past. If you are chronically stressed and depressed, go and talk to your GP.
You cross your fingers every time you try to use a cash point.
If trying to get cash out is an exercise in hope and prayer, this means you are not budgeting and you don’t know how much is in your current account. You urgently need to look at your bank statements and make a simple budget – more on this to come in a future post, but for now, even writing down your (truthful) income and expenditure on the back of an envelope is better than nothing.
You couldn’t cope with an unexpected expense.
If your boiler broke or your car engine caught fire or you needed emergency dental work, would you be able to cover the cost? If the answer is no, you are living on borrowed time and need to get an emergency fund together quickly. Yes, your debt is also an emergency, but you will fall further in to debt if you have nothing set aside to help you when (not if) a crisis hits.
Your debt is growing each month.
If your debt is creeping up and you don’t really know why, you are probably using credit to cover a shortfall in your day to day living costs. This is very dangerous and definitely not sustainable. If you are borrowing to pay existing creditors, it won’t end well and you need to take rapid action.
If you need debt help, where can you go for support?
If you recognise yourself if any of the above scenarios, it’s time to call in the professionals. I can’t stress enough how much better it is to get a grip on things before you are unable to service your debt or an emergency strikes. But don’t pay unscrupulous companies for help with your debts, there are lot of brilliant, free resources you could consider instead:
StepChange – an independent debt charity offering free advice, they are usually very busy so don’t stall until you are in crisis as you may have to wait a while for an appointment.
Christians Against Poverty – a charity funded by donations from individuals and the Church, but you don’t need to be a Christian to use its free services.
PayPlan – a free debt management organisation funded by the credit industry.
National Debtline – lots of downloadable resources and debt help over the phone.
Citizens Advice Bureau – helps you understand your rights when dealing with creditors.
Debt Advice Foundation – this charity has lots of tools and calculators to help you analyse your finances.
Moneysavingexpert.com has a wealth of guides which are a mine of useful information, and the forums, especially Debt Free Wannabe, are full of knowledgeable and supportive people who will look over your budget and make suggestions. But obviously do not rely on the advice of strangers on the internet, do your own research before making any decisions.