Most of us would assume that when financial problems hit, we can at least count on being able to see them clearly. Unfortunately, this isn’t always the case! The complexity and business of modern life can often distract us when problems rear their heads, and it can be surprisingly hard to tell the difference between getting by and needing help. Denying problems may seem like a way to avoid them but, in the long run, they will catch up with you, so it is always better to stay in the know. Below are five common warning signs that your personal finances might be in trouble.
One – You never know how much is in your Bank Account
If you find yourself surprised when you come to check your bank balance, you probably have at least minor issues with financial planning. Never knowing what funds you have available can be dangerous, and lead to unwittingly dipping into your overdraft. Not regularly checking your bank balance also makes reckless spending easier, since you can temporarily shield yourself from the consequences. One outcome of our dwindling use of physical cash is that it is more difficult than ever to see the immediate impact of your spending. Luckily, the emergence of online banking, and banking apps, have provided an alternative way to stay on track. Making it a habit to check your account balance every day is one simple step you can take to curb unnecessary spending, and keep in control of your finances.
Two – You don’t have Savings
If you’re getting by on your wages day-to-day, not having savings set aside might not seem like a problem. However, it’s pretty much inevitable that, at some point, you are going to have to make an emergency purchase. This might be new tyres for the car, an essential house-hold repair, or something more benign such as a wedding or birthday gift. Not having money set aside to deal with this kind of spending can leave you with no other choice but to borrow when your monthly income won’t cut it. In the long-run, borrowing money for expenses like there can put you in a much worse financial position. The solution is, although it can be challenging, setting aside a small amount of money on a weekly or monthly basis and ear marking it for emergencies. Setting up a separate bank account to do this is a good idea, since it will be more difficult to accidentally spend it on non-emergencies.
Three – You depend on Credit
Relying on credit cards or payday loans to top up your income from month to month may seem normal for many people, but it actually suggests that you might need some help organising your finances. The more money you borrow, the more you will have to pay in interest, meaning that this kind of short-term borrowing can be a slippery slope, getting you further and further into debt. If you find yourself struggling to stretch your wages over the entire month, short-term lending solutions can seem like your only option, but these tend to have the highest interest rates and, ultimately, do you the most damage. A good alternative might be to ask your friends or family if you can borrow from them for a short period – this can be embarrassing, but it is far better than paying exorbitant interest rates. Alternatively, using an overdraft might be a cheaper way to borrow, so it is worth checking with your bank.
Four – You don’t have a Budget
Another financial practice which can help you avoid relying on credit from month to month is to create a budget. Even a very basic budget is the single best change you can make to the way you spend. Like having a shopping list when you go to the supermarket, having a budget gives you spending targets, so you will never be unsure if you are overspending in a certain area. The Money Advice service has a helpful budget planner tool which can be a great place to start.
Five – You avoid opening Bills and Statements
Avoiding opening bills and account statements addressed to you is a sure sign that your personal finances are not in prime health. Putting off opening these letters clearly demonstrates that you are experiencing some anxiety when it comes to your financial situation. As with most problems, putting off dealing with it does more harm than good, so the solution is to set aside some time to open them all, and figure out exactly how much you owe and to who. Getting in touch with creditors and explaining that you are struggling to pay is also a good idea. Believe it or not, in many cases creditors are sympathetic to your honesty and intentions to pay them back, and will adjust your repayment programme to one which you can afford.
Although admitting that there is an issue can be tough, it is always better to acknowledge it sooner rather than later. The sooner you recognise a problem, the sooner you can get help with it – and help is out there. Click here to learn more about debt, and how you can beat it.