Credit Card Debt

10 Warning Signs of Financial Trouble

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One of the biggest hurdles people face before deciding to do something about their debt is acknowledging that there is even a problem. Denial is a strong force, one that can hinder you in making improvements to your financial situation. And if a family member or close friend is showing signs of debt trouble, it may be difficult to break through that denial and help them own up to it.

If you are wondering if your finances (or those of someone you care about) could be in better shape, here are 10 warning signs of financial trouble.

1. You are only paying the minimum amount, or less

You are not doing yourself any financial favors when you only make minimum payments. You generally end up paying far more in fees and interest than the item you purchased originally cost. If you can afford to pay more, do it.

2. You shuffle debt around from credit cards to credit cards

One of the most telling warning signs of financial trouble is the practice of moving money around from card to card. You’re not really paying off anything when you use other credit cards to make the payments (although balance transfer cards, if used properly, can help you reduce your debt). Debt shuffling does not equal debt repayment.

3. You are near the limit on each of your credit cards

When you have high credit card balances relative to your credit limit, it decreases your purchasing power and lowers your credit score. This metric, referred to as your “balance-to-limit ratio,” should be kept as low as possible.

4. You charge more each month than you make in payments

Charging more on your card than you make in payments each month is one of the most obvious warning signs of financial trouble, since it puts your financial situation on the wrong trajectory. It’s important to create a budget and aim to make payments on time and in full.

5. You’ve received phone calls or letters about delinquent bills

Are you constantly worried about getting calls from your creditors? This is a more urgent warning sign of financial trouble. If you’ve reached this point, it’s time to deal with the situation by resolving your debts and cleaning up your financial house.

6. You use credit cards because you don’t have money

In hard times, it is nearly impossible to avoid using your cards as a cushion. At the end of the day though, consider whether you can spend less or find additional income, because this is not a healthy path to be on for the long term.

7. You are dipping into your savings to pay your monthly bills

Any reputable financial advisor will tell you how important it is to have an emergency fund. If you are having trouble making payments and dipping into your savings, this is a sign that you are struggling financially.

8. You are embarrassed about your debt and afraid to let people know about it

Struggling with debt isn’t uncommon, but many debtors are ashamed of their situation. Debt is nothing to be ashamed of and the earlier it is addressed, the easier it is to recover.

9. You sign up for every credit card that sends you an offer

Every time you sign up for a new card, your credit gets pulled. If you are maxed out on your current cards, rushing to get a new one is a clear warning sign of financial trouble.

10. You worry constantly about your next paycheck or income source

Are you always impatient for payday? It’s so stressful to live paycheck to paycheck, and it shouldn’t have to be that way. Perhaps it’s time to review your spending and savings habits, and develop a plan to make better financial choices.

Learn how to get out of financial trouble

If you’re struggling with debt, worried about falling behind on payments, or noticing any of the other warning signs of financial trouble, it might be time to the next step. Freedom Debt Relief can help you make a plan for the better, which includes our debt relief program. Our Certified Debt Consultants can help you determine how to chart a better financial future and help you discover your options for managing debt. Find out if you qualify right now.

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Tammi Huang is a Marketing Manager at Freedom Financial Network. Her goal is to help people adopt better money habits and improve their financial health. She wholeheartedly believes that spending less doesn’t mean living less. When she’s not writing, Tammi fills her free time working on home design projects, trying new restaurants, and exploring dog-friendly spots with her rescue pup.