FORUM Credit Union's website works best with JavaScript enabled

Financial oblivion is not a state where you want to reside

People who are in financial distress typically don’t realize there is a problem until it is too late. Like many of life’s difficult situations early detection is the best way to avoid serious consequences.  Knowing the warning signs and the financial behaviors that can lead to financial concerns is the best way to keep your finances on the correct path.
Are there any behaviors that are more likely to lead to financial concerns?
If you are an impulse buyer or you are willing to spend more than you make each month you will more likely have financial difficulties.  Understanding your financially detrimental behaviors is really important to avoiding future problems.
What is an early warning sign that one is headed to financial distress?
One of the very first warning signs is using your credit card to buy everyday items like groceries, coffee or lunch. This typically indicates you have a cash flow problem and you are spending more than you make in a month. 
What typically happens when someone is using credit to fund their spending habits?
Most start paying just the minimum payment because they can’t afford more than that.  It becomes a snowball effect as the person has less money for monthly expenses and requires more debt each month, which then increases the minimum payment and decreases monthly cash flow available.  It becomes a vicious cycle.
What are the signs of trouble that are missed most often?
Two of the biggest signs that trouble is looming is starting to pay bills after the due date and having occasional overdrafts on your checking account.  Many people view these as temporary setbacks rather than a forewarning that they are starting to get overextended.
What are signs the situation is really spiraling out of control?
The biggest is carrying balances on multiple credit cards and using cash advances from one to pay the minimum payment on others.  The second sign that someone is really in trouble is paying all of their loans and other bills every other month which means they are past due on all of their accounts all of the time.
What should a person do if they start seeing signs of financial problems?
First and foremost develop a workable budget or spending plan so that you can avoid adding to the problems.  Next, look at what is causing the most pain for your finances and work to solve that issue, or at least lessen the impact on your monthly financial situation. There could be difficult choices to make such as housing costs, transportation costs two name two of the bigger ticket items.
Are there proactive steps that can be taken to avoid getting into financial difficulty?
Planning is the most effective manner to avoid financial difficulty. Knowing what you can spend and how much debt you can effectively manage are two of the most important reasons to develop a budget. 
What advice would you give to those who are younger?
It is also important to start planning early in life, from the amount of student loan debt, cars that are financed or choice of housing when leaving college. And developing good spending habits and financial awareness in high school or college will be key foundational pieces for a lifetime of financial well-being.

Posted: 3/18/2016 with 0 comments

Categories: Finances, Money Matters, Planning

Blog post currently doesn't have any comments.
 Security code