Are You Destroying Yourself Financially?

Many Americans today KNOW they are in debt but when asked by exactly how much, many do not have a clue. As a result, when subjected to debt consolidators or credit helpers, they are literally shocked to find out that they are that knee deep in debts.

Do not let this happen to you. Here are a few red flags to watch out for to see if you are destroying yourself financially and a few tips on how you can help yourself recover from it.

You do not have an emergency fund

Ideally, one must have 3 to 6 months' worth of monthly expenses as an emergency fund (the operative word being emergency) – even more if you have employment concerns, like being laid-off. The rationale for this is that in case there is an immediate need for something – car repairs, illness – you can still cover this situation WITHOUT having to go ran off for a loan. The same goes if you have an existing loan, do not dip into your savings to make loan payments.

You stick to the stated ‘minimum payment’ of your credit card bill

One common mistake people do is paying only the minimum due in credit card bills. This is not good especially if you have a large amount of debt as it makes the total amount of the loan a lot bigger, the difference of which you should have kept for yourself. Paying only the minimum means you do not have anything extra to cover a bigger portion of your debt. If you think about it, it is almost like paying for just the interest charges for the month.

You "rollover" payday loans

Are you the King/Queen of payday loan rollovers and extensions? This is a sure sign that you are in or nearing financial ruin.

Though payday loans do not charge an interest, the loan fee, when computed at an annual percentage can go as high as 650%! If you decide to rollover or extend payment for a payday loan, it would be tantamount to paying a higher interest for the measly amount you applied for – even if it’s “just” $15 to $18.

You fall behind basic bills

Ideally, you should be using only 10-15% of your take home to pay for non-mortgage bills. Falling behind the basics only means that you might have too much debt. Normally, one should have enough money to cover the basics and at least the minimum due for a loan. In worse cases, one might already be receiving notices from utility companies and other creditors about being overdue. This is definitely a sign of a very unhealthy financial condition. Apart from ruining your credit report, just think of all the late fees and finance charges you will incur.

If you see yourself in any one of these situations, it is high time for you to do something about it.

Reassess your lifestyle and see if you are over-spending or spending too much money on irrelevant things. Must you really smoke? Should you really buy a cup of coffee at that coffee house every morning across your home when you have a perfectly working coffee maker?

Prioritize. Get rid of unnecessary expenses and most importantly, learn to live within your means.

Worst-case scenario, you might need to speak with your creditors for payment arrangement or seek the help of a financial advisor for help on budgeting and how you can recover from this financial destruction. Remember, however, that these parties can only help once you have decided to take that step to start helping yourself.

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