Financial Planning

Warning Signs of Financial Trouble

Financial issues don’t emerge abruptly from anywhere. In most cases, they are due to years of financial mismanagement and poor decision-making. Whenever these problems arise, we choose to live in denial of our financial position. The result of such choices is a life full of debts and the inability to pay bills. One way of curbing financial issues is by detecting them early before they’re magnified. Being in debt is not the only indicator. Below are the red flags that point towards economic turbulence.

1.Credit Denial

The primary indicator of financial difficulty happens when we’re denied credit. The warning sign ‘over our heads’ shouldn’t be taken lightly. Credit providers generate such warnings based on our credit scores and credit history. Higher interest rates are charged whenever our credit scores are sub-average. The worst situation occurs when lenders ultimately refuse to approve our credits. This might be due to poor credit ratings, large amounts of debt owed, several late payments, and unfavorable debt to credit ratio. We need to change our financial habits immediately when we run into credit problems with lenders.

2.Lack of Emergency Funds or Savings

Everyone, including those without families, know the importance of a savings account. Most of us have emergency funds, while others prefer emergency accounts. No matter the type of account, such a fund’s importance is to avail cash when unexpected events happen. These events could be a job loss, a car breakdown, or a recession. Living without savings is similar to gambling, and the results could be financial obscurity. The consequences are unthinkable to individuals with a family. Income shouldn’t be a determinant of an emergency fund. I created my first savings account at 18 years when I held a minimum wage job. I never saved a lot, but it was better than having nothing as my backup cash.

3.No Health Insurance

The cliché has always been that that health insurance is way expensive. However, ignorance is bliss. It only takes an unfortunate accident to discover the actual cost of hospital treatment. The scenario gets worse when family members are hospitalized, and we haven’t covered them. If such cases do occur, we usually find ourselves deep in medical debt. A short stint in a hospital bed can attract hefty bills that we might struggle to raise. What follows are unintentional loans in a bid to offset medical arrears. We can avoid such financial turmoil by investing in health insurance that covers our family.

4.Borrowing to Pay a Debt

A true sign of being head deep in financial trouble is when we borrow cash from one lender to offset other lenders’ loans. Once we’re in, it’s an unending cycle of maxed-out credit cards. The situation is further compounded when we borrow at high-interest rates to pay insignificant loan amounts. The impact of this borrowing is living from paycheck to paycheck. Monthly bills become unpayable, servicing our vehicles problematic, and life as we know it takes a turn for the worse. Borrowing to pay another loan is always a bad idea. The alternative is renegotiating payment periods with lenders. You could also consider paying off some of your debt by selling assets that you can buy back later in life once you’re more financially stable. For example, you could visit websites like https://webuyhousesinatlanta.com/ to sell your current house and alleviate some of the debt burden. Taking this proactive approach enables you to generate funds to settle outstanding balances without falling into the cycle of borrowing to pay debts. Similarly, you could also consider selling some of your investments like gold or other valuable assets to create a financial cushion for debt repayment. This strategic move not only helps break the cycle of borrowing but also provides an opportunity to regain control over your finances.

5.Ignoring Debt

Taking a loan or borrowing cash is inevitable at some point in our lives. Borrowing is the easier part but using the credit appropriately is problematic. Sometimes we act ignorantly by spending exorbitantly, with little care that we will repay this amount later. In the end, we pay a lot for things that add little value to our lives. Sometimes, this may cause our lenders to be concerned due to the lack of installments on our part, and they might contact a debt collection agency to retrieve their amount. These professionals would proactively help us come up with a plan to get out of the debt, which would be beneficial both for us and our lenders since it would get us out of our procrastinating state of mind and help the creditors get their money back as well.

Conclusion

Financial woes tend to spiral out of control with time. The sooner we take action, the more likely we’re to rectify the situation. We should all pay attention to the mentioned signs and change our financial habits before it’s too late.

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