Personal Debt Consolidation

Personal Debt Danger Signs

Risky financial behaviour takes root months before an emergency arrives, bringing forth bankruptcy, foreclosure, or repossession. Before you head down a road of financial troubles, heed these warning signs, you might quickly change gears and pull out in time.

No savings: not having even $500 stuffed away in your bank means you absolutely have no cover for unpredictable expenses, like an emergency dental job or a car repair. Ideally, you should build up at least three months' worth of living expenses to give yourself a cushion for moving places or changing jobs.

You owe your credit card: full stop. Carrying credit card debt is one of the fastest ways to see your net worth go down, down, down. It never pays in the long run to be throwing money after your debt rather than building up your investments/ savings. Additionally, any balance you have on your card is money you can't access in case of a real cash emergency.

Bank/Credit card statements surprise you: you can't rely on a few day's lag time anymore when it comes to overdue payment, overdrafts, and over-limit transactions. Gain a secure online access to your account and check weekly, and more frequently if you've ever over-cashed out in the last six months. To get a clearer idea of your cash flow and avoid overdrafts, install a personal finance application on your PC and plug in your expected deposits and withdrawals.

You've missed a payment on a loan: missing just one payment is already a ringing bell for interest rate hikes on your credit card, collection actions, repossessions and foreclosures down the road. If you've skipped a payment, get immediate action on your finances.

Tapping loans to pay lenders: if you're transferring one credit card to pay off another, or using your home's equity value to pay off credit card balances, you're in danger unless you have a plan to cut down on your debt in the near future.

You have no disposable income: this means you have no money left over after your necessities and monthly bills. Having fixed expenses eat up all of your paycheck is not a comfortable palce to be in savings-wise, and you'll need to start trimming out the fluff from your lifestyle. Take a good look at your spending habits and get help from other people, especially qualified financial advisers.

You haven't looked at your mortgage lately: not knowing your mortgage's terms would mean you'll be making assumptions about your monthly payments that could well be scaling new heights a few months from now, leaving you scrambling to cover the bill. You can only assume your mortgage interest rate will stay the same if you got a traditional one. Ask if your mortgage payment is fixed-term or adjustable, and when the payment resets if it does. If you're looking at higher payments in the future, see if you can cut back on other items of your spending, increase your income, or consider refinancing.