Warning signs that financial difficulties are looming may not always be obvious. In many instances where individuals are struggling with money there’s been an indirect slide into debt over time, or a few overlooked events have caused a manageable situation to get out of hand. Maintain control over your debts and keep credit trouble from creeping in by checking for these five subtle signs:
1) Ignoring your account balances. Do you know how much is currently in your chequing account? How about the balance on your VISA? Not being aware of your bank and credit balances can easily result in everything from bounced cheques to being overcharged. Lenders and vendors you deal with may not notice discrepancies so make a point of reviewing your balances after every few purchases and after each payment is made.
2) Not having a budget. Having a budget that functions is key to staying on top of your finances, meeting money goals AND getting out of debt. Leaving your financial obligations to chance and haphazardly paying expenses that hopefully coincide with payday is a sure-fire way to run into roadblocks down the line. A cycle of using payday loans or regularly relying on an overdraft to fill the gaps in cash-flow is hard to break once it’s been started; planning your income and expenses can help avoid this.
3) Leaving it all to your spouse. While it may seem like a great idea to delegate all the responsibilities of the household financial management to one spouse, the reality is that this can result in huge problems. The managing spouse may feel stressed and eventually resentful about bearing the sole burden of juggling finances, and while the other spouse may be blissful in their ignorance, debts for which both are liable may be mounting. Conversely, the hands-off spouse may feel worried, kept in the dark and be unaware of key money matters. Have an open dialogue with your partner and make sure you both contribute to handling the family’s financial affairs.
4) Forgetting about the future. Like it or not, time flies and a healthy outlook on finances also includes looking to the future. Whether it’s contributing regularly to savings for retirement, working towards a financial goal, or avoiding the temptation of using credit you can’t repay immediately, it’s important to remember that ‘tomorrow’ will come sooner than you think. Nothing can derail well-made plans like unmanageable debts – so carefully consider before committing to major purchases and curb any impulse spending you may find yourself indulging in.
5) Misunderstanding how your credit works. Do you know how compound interest accumulates? Are you up-to-date on your account dues and late-penalty charges? Have you signed up for credit with annual fees? Always read the fine print before you sign and ask for clarification on any terms you may be uncertain of before agreeing to credit. Lenders extend credit to make money so always be sure the terms are working in your favour and that you’re fully aware of your responsibilities under the contract.
Credit can be a great tool if used correctly and a huge frustration otherwise, so if you find yourself with any of these subtle signs, now is the time to take charge of your finances.