Sunday , 14 April 2024

8 Signs You’re Flirting With Financial Ruin (+2K Views)

Are you heading for a financial fall? The line between a future of financial solvency and one of distress is thinner than you might think. Bankrate offers 8 signs you’re flirting with financial ruin. If 4 or more of these signs sound familiar, it’s time to seek help. [Take a look.] Words: 1697

So reports Claes Bell (

The article below has been edited ([  ]), abridged (…) and reformatted for the sake of clarity and brevity to ensure a fast and easy read. The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.

Bell goes on to report the following:

Unfortunately, many people don’t realize they’re on the wrong side of that divide until it’s too late, says Jessica Cecere, South Florida regional president for CredAbility. “I call it the ostrich syndrome. You know that things aren’t good, but you just don’t want to face up to it right now,” but the earlier you realize you’re having issues with debt, the better chance you have of fixing them.

Cecere recommends looking for a free, nonprofit credit counseling service. You can search for a free or low-cost counseling provider in your area by visiting the National Foundation for Credit Counseling website or by calling (800) 338-2227. Another alternative is contacting a fee-only financial planner. The National Association of Personal Financial Advisors maintains a database of fee-only planners on its website.

8 telltale signs you’re heading for a financial fall:

1. Paying late fees and juggling bills?

Frank Boucher, principal of Boucher Financial Planning Services in Reston, Va., says habitually running up late fees typically has one of two causes. “If you’re paying late because you can’t pay on time, that’s a clear indicator (of future financial trouble),” Boucher says. “If you’re paying late fees because you’re just lazy about it, you’re throwing money away.
“A more serious symptom of financial distress is juggling monthly bills by making payments big enough and frequently enough to keep services flowing, but never paying balances on time and in full, Cecere says. Your debt worsens every month as balances grow. “You’re thinking ahead of time, ‘I don’t really have enough money to pay my bills,’ and you’re sort of living paycheck to paycheck,” she says.

2. Counting on a future windfall

Basing your plans for financial stability on a future payoff, such as an inheritance, a run-up in the value of your home or a big tax refund can put your finances in dire straits. It’s also a symptom of a bigger problem — rationalizing when it comes to your debt, Boucher says. “You’re planning on a bonus that doesn’t materialize, or what we saw happening not too long ago, with people saying, ‘I can always suck more equity out of my property,'” he says. “If you think like that, you’re really setting yourself up for a fall.”
3. Multiple credit card hocus-pocus
Credit cards are best used as a convenient way to make purchases without having to carry cash and to earn rewards, Cecere says. “If you’re a savvy consumer and you can use credit cards and you can get points for them … then you’re charging groceries and gas, but you’re paying for them at the end of the month,” she says.
If your credit card debt is consistently rising and you’re unable to make more than the minimum payments, your balance will continue to rise and if you fail to make the minimum payment for more than 60 days, your rate could jump, making your financial condition even worse.
While cardholders can stave off trouble temporarily by making the minimum payments or shifting balances to new cards, any kind of sudden change in your finances, such as a rise in gas prices, can destabilize your finances, Cecere says.
4. Fighting with your partner over finances
Most couples have occasional fights about debt, but if you regularly fight with your spouse about money, it can be a sign there’s not enough disposable income to finance the family’s spending, Boucher says. Likewise, Cecere says if you’re regularly suffering from stress over heavy debts, it could be an indication that your financial situation is unsustainable. “It’s on your mind, but you don’t want to talk about it. You can’t sleep at night because you’re worried about your bills,” she says. If that description sounds familiar, Cecere says it might be time to seek a free, nonprofit credit counseling service.

5.  Regularly paying overdraft fees

If you’re constantly incurring fees for overdrawing your checking account, you could be on the brink of financial disaster, says Wayne Blanchard, senior partner at Money Professionals Group in Orlando, Fla. He compares nonsufficient fund fees, or NSF fees, to the nautical flags raised to warn of dangerous wind conditions. “If you’re getting a lot of NSF notices, that’s a hurricane warning flag. It’s here,” Blanchard says. “That’s not a warning, that’s a real problem here now. “Regular overdraft fees can occur for a couple of reasons, says Blanchard. Many serial over-drafters are struggling financially and don’t have income available to cover their debts, meaning they’re likely on the verge of having to declare bankruptcy.

6. You have a savings rate of zero

If you’re unable to set aside a small amount of money for savings in your budget, your finances are on unstable footing, says Boucher.”Savings is an expense, and it’s something that should be budgeted for just like any other expense,” Boucher says. “What’s going to happen is something is going to come along — an unexpected car repair or a home repair or an interruption in income — and you’re going to be in a very bad place. “He says that while saving may be difficult, not saving puts you at risk of financial hardship. “With no savings, you’re really standing on the edge of a cliff,” he says. Blanchard agrees. He says many people rely on credit for their emergency backstop, but credit isn’t effective as an emergency savings fund. If banks see you regularly adding abnormally high charges, they’ll clamp down on your limit. In order to be financially healthy, you need to set aside money for unexpected emergencies and for your future retirement, Blanchard says. While an emergency may never come, retirement certainly will, and you’ll need to be financially ready.

7. Covering expenses with retirement savings 

Borrowing or withdrawing retirement funds from your 401(k) is a common thread in many of the cases of financial distress that Boucher has seen as a financial adviser. Boucher says, “401(k) loans are usually a bad idea under any circumstances, but when you have more than one, that’s a sign that you’re not managing your cash flow very well. “Regularly pillaging your retirement savings isn’t just a warning sign you’re living outside your means, it could have serious consequences for your retirement. It lessens the beneficial effects of compounding that help retirement funds grow.
8. Treating your home like a piggy bank
Using your home equity as a financial crutch is something Boucher often sees with clients heading toward financial distress. Boucher says such moves are especially ominous if they’re not due to a serious financial need but to a desire for “wants” like a vacation or a new car. “You’re paying for a vacation with a home equity loan and you’re amortizing that over 15 or 20 years. That just doesn’t make any sense,” Boucher says.


Other Related munKNEE Articles:

1.  10 Money Ideas That WILL Change Your Life

Personal finance isn’t nuclear physics – just spend less than you earn, save and invest the rest – but knowing what should be done and actually doing it, however, are two different things. Here are 10 money lessons I wish I had known when I was 20 which have the power to change your life if you are willing to embrace them. Words: 1340

2.  In Debt? Here are 10 Ways Out

When people talk about getting their personal finances in order, they usually try to find relatively pain-free and low-cost ways to reduce debt and increase savings but this is a long-term approach which some people just cannot “afford”. [For them] …it may be worthwhile to consider taking the hard way out of debt. [Let me explain.] Words: 1370

3.  10 Ways to Protect Your Hard Earned Money

Consumers should follow a few basic rules to protect their money…Let’s review 10 of them: Words: 620

Frugality often gets a bad rap. Many people misunderstand frugality and assume that it’s nothing more than being “cheap” when, in reality, frugality is making sure that you get the most from the money and resources you have, even if they are limited. [Here are 10 ways to do just that.] Words: 1132

5.  Are You a Millionaire? 10 Reasons You May Not Be and What to do About It

The reason you are not a millionaire (or even on your way to becoming one) is really quite simple. You probably assume it’s because you aren’t earning enough money but the truth is that, for most people, it does not matter how much money you make… [but, rather,] the way you treat money in your daily life. [Let me explain.] Words: 875

6.  More Reasons You May Not be a Millionaire – Yet

Many people assume they aren’t rich because they don’t earn enough money. If I only earned a little more, I could save and invest better, they say. The problem with that theory is they were probably making exactly the same argument before their last several raises. Becoming a millionaire has less to do with how much you make, it’s how you treat money in your daily life. The list of reasons you may not be rich doesn’t end at 10. [Here are 10 more.] Words: 842

 7. 2 Ways to Reduce Your Debts Using the “Snowball” Method

What is the best way to reduce debt? The most-efficient means is probably the snowball method. There are two main variations of the snowball method, but you must consider your personality to determine which of the two is right for you. [Let me explain.] Words: 1251