4 Signs Of Financial Danger

Danger Thin IceNone of us are perfect financially, even those of us who “have it together” may have downfalls in some areas of our finances.  That weak area for me is grocery shopping – as much as I try, if I don’t have a plan for the month, I will go over budget.  Or there are other times when I really want to do something, know that money designated for that item has been used up for the month, and do it anyway.  All of us are tempted in one way or another to push the boundaries of our financial means, yet there are also boundaries that can become dangerous once we cross them.  In a brochure, The Consumer Credit Counseling Service has identified 10 financial danger signals, are you pushing your financial boundaries?

From the 10 questions that CCCS provides in this brochure, I have selected these top three and added a fourth that I see the most of among individuals and couples.  If you answer yes to any of these questions, then it is time to create a budget.  If you answer yes to all of these questions, it is time to seek financial counsel in regards to creating a budget and getting your finances in order.

1) Are you charging everyday expenses or small items?
Everyday expenses are items like gasoline, groceries, eating out, ect.  These are everyday living expenses that are necessary in order to “function” per say and if you are charging them to your credit card, they are adding up fast!  Small items include items like a soda on your lunch break, a pack of gum, a coffee at Starbuck’s…minimal purchases that again, add up!

2) Is there an increase in money arguments in your household?
According to Ron Leiber of the New York Times in 2009, approximately 45% of marriages end in divorce due to finances.  Over the years, this percentage hovers around that 50 percent mark.  If I told you that you had a 50% chance of winning 1 million dollars, would you gamble?  I am sure you would!  Well…let’s not gamble with our marriages…these odds are too high.  The key in addressing this is yes a budget, but ultimately communication.  I recommend that you meet with your spouse once per week to discuss where you are in regards to your budget, against your goals, paying down your debt and other financial discussions that may be painful, but necessary.

3) Are you borrowing more money before the old loan is paid off?
You have a home mortgage, car payment and credit card bills – on top of this you have bills coming in that you are having to use credit cards for to cover…and then one of your cars dies…you are left to purchase a new vehicle, but you don’t have the cash.  What do you have to do?  Heap another loan on top of the other loans you have…and on top of this additional debt, you are still accumulating massive debt by the everyday expenses and bills that you are having to cover with credit cards.  No one should have to undergo this stress.  So, declare bankruptcy?  Not so fast…  If you are not in default, the first real move is to reduce your living expenses so that you can move off the credit cards for your everyday expenses and bills.  Not all of us chose to be in debt, but 90% of us do.  Remember, you got yourself into the mess, time to get out.  As an adult, would you go over to your parent’s house and trash it…leave and expect them to pick it up?  No.  Don’t expect others to clean up your mess, you are a big kid now.

4) Do you have delinquency on your debt?
When I talk to individuals about scheduling a consultation, the first question that I ask is if they are behind on any of their credit card bills or loans.  If they say yes, I ask how much.  I then ask them if they are receiving calls from their creditors or collectors, if they say yes, then I have to refer them to a credit counselor.  This is not because they are at the point of no return, it is just that without an increase income immediately, this couple is headed towards a scary place.  The first goal is to identify ways that you can increase your income.  The second step is to meet with a non-profit credit counselor who can work with you to negotiate with your creditors so that they stop hounding you and get specifics set in place so that you have a little breathing room.  This is not the pathway to bankruptcy, this is the pathway to cleaning up your mess.  It takes determination, hard work, desire, responsibility, focus and an increase in income.  You can do it…you just have to want to.