Signs of Financial Mess – and Debt Reduction

Today I want to share with you the all obvious sings that present themselves in advance before your personal finance get deep in financial mess. If you can be able to tell you are headed for a financial mess, it would be easier and cheaper to correct the problem before it escalates. The signs of your future financial mess will be found in the following:

Lagging Behind In Debt Payments

If you find yourself start lagging behind in debts payments, then, this is a positive sign that you are headed for financial troubles. It starts like this: you get this month's bills and you have not paid for the previous month's bills. You must realize that a debt only become a problem when you start lagging behind in debt payments.

Borrow Pay an Old Debt

Shrewd creditors like banks know it all. Borrow from me, I pay all your old debts and still retain enough cash in your pockets to spend as you wish right now. It's called debts restructuring. If you ever find yourself attracted to these debts restructuring, then you are actually headed to intensive care unit as far as your personal finances are concerned. It works like this: You have a debt of $120,000 to pay in twelve months, each month you are repaying 10,000. And because very little is left to you to pay for basic essentials like food and rent, you approach another creditor to restructure your loan. This new creditor agrees to give you a loan of $180,000 repayable in 3 years at the rate of $5,000 per month. From the $180,000, they will use $120,000 to pay your old debts and the balance of $60,000 will be given to you to spend as you wish right now. So, instead of you paying $10,000 per month you will be paying $5,000 per month plus an additional $60,000 to spend as you wish? That does seem like an attractive arrangement and indeed it is as it carries with it many victims including CEOs of your favorite companies. Again, if you ever find yourself attracted to this kind of debts restructuring, then you are actually headed to a deep financial mess.

There are those expenses that are paid only once a year. You anticipate these expenses will come at the beginning of next year and you have to save for them in advance. Expenses like insurances and servicing charges to your car will probably come once a year and you need save in advance to meet these charges. If you are unable to save for these anticipated expenses, then your personal finances are headed for trouble. Spot these signs and start doing something about your finances because the truth is that these problems will eventually present themselves to you.

Borrowing New Loan before Old Loan is Paid

You took a loan one year ago and you have been repaying for this loan without failure. But somewhere along the line you find things have become difficult and you need to take a new loan before you have finished repayment for the old loan. Stop it. You are now entering the path to your financial mess.

Unable to Tell What You Owe

If you ever find you are unable to tell what you owe your creditors, then something is terribly wrong somewhere. You just feel you want to bury your head in the sand because if you ever bother to dig out what you owe your creditors, you will feel bad and fear. If this is the case with you, force yourself to check how much you owe in total to all your creditors, check your plans and see whether you are keeping to them. Chances are that you are not.

Borrow to Pay for Utility Bills

Credit cards provide the convenience and security for you to spend your hard earned money. Yes, they provide the convenience and security for you to spend your hard earned money and not what is yet to be earned. If you are borrowing money on credit cards to pay off utility bills of small expenses like rent, electricity, tuition fees, then you are better off without the credit cards. Chances are high you have no idea how you will pay the credit cards bills when they fall due. By borrowing to pay for utility bills using credit cards, you are actually digging a new drain to your finances.

Money Arguments at Home

Why is it that you and your spouse all of a sudden have started arguments on money related subjects in your household? You have to be open to each other. Chances are that the problem is none of you but rather a sign of financial troubles to face both of you in the near future. Agree to find out where the problem is and work out a plan to go about solving this problem. This problem if not checked early enough can breed many other problems that will affect others and including the children. If this problem ever happened to you and you are unable to solve it, seek for professional advice so that the family can lead fulfilling lives.

Loans Repayments More Than 75% of Your Income

If you find your loan repayments are more than 75% of your total income, then my friend you are already in financial trouble. However, if you are doing this so that you become debt free sooner, then this is not a bad thing after all. The remaining 25% may not be sufficient for you to pay for basic essentials like food and rent. And when you start defining what life is, you will realize you need to live a decent life and not one of misery.

Borrow From a New Source to Pay an Old Debt

Shrewd creditors like banks know it all. Borrow from me, I pay all your old debts and still retain enough cash in your pockets to spend as you wish right now. It's called debts restructuring. If you ever find yourself attracted to these debts restructuring, then you are actually headed to intensive care unit as far as your personal finances are concerned. It works like this: You have a debt of $120,000 to pay in twelve months, each month you are repaying 10,000. And because very little is left to you to pay for basic essentials like food and rent, you approach another creditor to restructure your loan. This new creditor agrees to give you a loan of $180,000 repayable in 3 years at the rate of $5,000 per month. From the $180,000, they will use $120,000 to pay your old debts and the balance of $60,000 will be given to you to spend as you wish right now. So, instead of you paying $10,000 per month you will be paying $5,000 per month plus an additional $60,000 to spend as you wish? That does seem like an attractive arrangement and indeed it is as it carries with it many victims including CEOs of your favorite companies. Again, if you ever find yourself attracted to this kind of debts restructuring, then you are actually headed to a deep financial mess.

As a layman, these are the signs that you should use as a scale to gauge if your personal finances are headed for financial trouble in the near future. A goal is only a goal if it is specific and has a time frame.

^{The Author’s page is designed to help beginners and average readers make some money as an extra income to supplement what they may be earning elsewhere - details of which you can find in My Page, if you will.}

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