The signs that prove you are deep in debt
Sometimes our feelings of dread can tell us as much about the poor state of our finances as any bank statement -- but it's better to face facts than live in doubt or denial, writes Frank Conway
RECOGNISING the warning signs of growing financial problems can be a powerful first step to managing your finances through difficult times.
But how do you know whether your finances really are in danger?
The important thing to remember is that you are not alone when it comes to having a difficult financial situation. What can set you apart is how you deal with it.
A first step to managing your finances is actually recognising the warning signs that your finances could be in difficulty.
Remember that recognising a problem and fearing one are two different things.
Recognising it means that you are using measures, from which you can begin to plan to take action.
Fearing a problem means that you are unsure, which can lead to increased levels of financial stress and inaction.
The following are 12 signs that you may be putting yourself in financial danger:
1) You are only paying the minimum monthly repayment on your credit cards
Minimum monthly repayments are typically set at ridiculously low levels.
In many cases, they can be as low as 2.5pc of the outstanding balance and, once interest charges are added back in for the month, the minimum payment barely makes a scratch on what you owe.
If you're only managing to pay such a small amount, it's going to take you a long time to pay off your credit card debt in full.
Not only that, but you will end up paying far more in interest before you clear your balance.
2) You are unsure on how much you owe your lenders
If you have lost track of how much you owe, you are probably overspending.
Losing track of what you are spending is not a good idea, especially if you're spending large amounts. It indicates you have little or no control over your finances.
3) You are borrowing to pay off your debts
Borrowing more and getting further into debt to meet your other debt payments is a dangerous path to follow -- particularly if you're using credit union loans and credit cards just to cover monthly payments on other debts. You could find yourself in serious trouble in the future.
I call this the downward spiral of debt, which will require a sustained and prolonged effort to recover from.
4) You are usually late paying your bills
If you regularly fail to make your bill payments on time, your cheques bounce, or you overspend on your credit card or overdraft, you'll incur extra fees and charges from your bank.
This will drive you further into debt and could also damage your credit rating. Late payment on bills will actually make a bad financial situation worse as you will usually incur penalties and charges -- costs you cannot afford.
5) You are in negative income and use your credit card to pay for everyday spending
If you regularly use your credit card to pay for necessities such as food or petrol and can't afford to clear the balance each month, your debts will continue to build up and put more strain on your finances.
6) You're spending more than you earn
Yes, it is possible to do this through borrowing. If you have no idea what your budget is and you're spending more than you earn each month, or you're not sure whether your salary is covering your expenses, then you could be in serious trouble.
7) You don't have any savings
Savings rates have actually increased in Ireland over the last two years.
So, if you are one of those that is unable to put even a little money aside for a rainy day, that can be a sign of trouble.
8) You are constantly turning to others for financial help
If you have been forced to turn to friends and family for financial assistance over the past 12 months, this could be a sign that you have a problem with your finances.
9) You fear conversations about money and personal finance even among friends and family
If you fear conversations about money or finance with friends or family or have not been open or honest in certain circumstances, it could be due to the fact that you are afraid to compare your own situation with others.
The fact that you have been afraid to even discuss your situation can be a sign that your finances are out of control. However, you could be making a bad situation worse by worrying about your problem.
10) You are fearful of answering your phone or opening mail
You have taken to not answering phone calls or opening letters in case it may be a call from a creditor.
Not all creditor calls are negative but if you fail to open and maintain a dialogue with creditors, it could lead to other problems such as creditors taking action to recover payment.
11) You've been rejected for credit
This could be because you have already got too many credit cards -- even if you no longer use them -- or because you've missed payments in the past.
12) You're constantly worried about your finances
Research from moneycoach.ie reveals that 27pc of homeowners have experienced problems paying some or all of their bills.
Almost 21pc admitted not knowing how much disposable income they have remaining at the end of each month.
If you are unsure of your financial situation, it is time that you took the first steps and look for the warning signs that could lead to personal financial difficulty.
If any of the situations outlined above apply to you, you're probably feeling concerned.
Debt can have a serious impact on your life, but the important thing to remember is that you don't have to deal with it on your own.
Simply talking about your financial problems with your friends and family can feel like a huge weight has been lifted off your shoulders. What's more, it's a big step in helping you to face up to your debt problem.
-- Frank Conway is a director of Irish Mortgage Corporation, which has launched a financial advisory service called MoneyCoach. This company offers personal budgeting advice and counselling.