Sometimes debt issues can materialize very suddenly, such as with the unexpected loss of a job, but in most cases debt problems do not arise overnight. Usually they grow over a period of months and years. People who are dealing with a serious debt problem are nearly always very aware of it. In contrast, it is easy for many small financial difficulties go unrecognized and unaddressed until they finally grow too serious to ignore.
When it comes to your physical well-being, early diagnosis and treatment of illnesses is preferable, and the same principle applies to your financial health. Not only are “fully developed” debt troubles almost always more serious, they also are generally more challenging and difficult to deal with than small, early-stage conditions. Although every person’s individual circumstances are different, there are several common warning signs of impending debt problems.
1. Not having any financial reserves. Many, many people find themselves in this situation. They may be able to easily take care of their monthly bills and living expenses. However, because they do not have much, if any, money saved for unexpected needs, almost any financial emergency–such as expensive automobile repairs, missing a couple of weeks of work because of injury or lay-off, or necessary medical expenses not covered by insurance–will likely put them in hot financial water very quickly. Many credit professionals recommend setting aside a large enough sum of money to survive on for up to 6 months without your regular income. Having this money reserve will make it possible for you to successfully survive most kinds of unforeseen, temporary financial calamities.
2. Worrying about possibly bouncing a check or going over your limit on a credit card. Having these kinds of worries about whether or not you have enough money available when you need it is a definite indication that you may soon be (if you’re not already) in trouble financially.
3. Being able to make only the minimum required payments on your credit cards, even though your outstanding balances are steadily rising. Obviously, if your credit card balances increase each month, then you are getting deeper and deeper into a financial hole. If this cycle of overspending continues for very long, you will soon find yourself facing some serious debt troubles.
4. Maxing out one or more of your credit cards. Credit cards make it possible for consumers to purchase things that they really cannot afford at the present. A maxed out credit card could be a warning that you may be purchasing more with your credit card than what you are able to easily pay off within a few months. If so, continuing on that path will almost certainly increase your chances of facing some significant debt issues down the road.
6. Getting cash advances from your credit card in order to make payments on other bills. Actually, if you need to borrow money in order to pay some of your bills, then debt has already become a problem for you. This strategy is risky not only because these cash advances add to your debt, but also because card companies typically charge a significant fee for each cash advance, along with higher interest rates. Acquiring money in this way to meet your monthly financial responsibilities is, at best, a short-term solution to what is likely to be an escalating dilemma. It is crucial that you either generate more income or slash your expenses—or both—as quickly as you possibly can.
7. Living paycheck to paycheck. A sizable number of Americans are earning just enough to meet their monthly living expenses. In most cases, people in this situation are trying to live beyond their means, so it is crucial that they either increase their income or reduce their expenses–or both. Otherwise, if they should miss or get behind on any of their payments for any reason, it can be extremely difficult for them to get caught up, since they have no extra cash or savings that they can draw on.
If any of these common danger signals accurately describe your circumstances, then you should initiate corrective actions to eliminate them immediately. If you procrastinate on taking action, in most cases your plight will only get worse and become increasingly difficult and painful to address. If you are unsure about how to effectively resolve your problem, then you certainly should consider getting professional assistance.
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