The warning signs of financial trouble are everywhere, if you know where to look. Knowing what they are and how to recognize them can be the difference between quickly recovering from one or two bad months and being trapped in a months or years-long battle with debt.
Don’t let these unproductive habits and behaviours derail your financial future. If you notice any of these symptoms in your life, you may need to take immediate steps to fix them and take the exit ramp off the road to poor financial health.
1. Living Beyond Your Means
Be mindful of how many impulse purchases you make each month and how frequently your bank account is empty before the next pay day. Struggling to make ends meet not only impacts your immediate finances, but also how you’ll weather an unexpected financial emergency without falling into a vicious cycle of debt.
What to Do Next
If you want to get ahead financially, you should always spend less than you earn. That means creating a budget and sticking to it. It sounds simple, but it’s certainly not always easy — that’s why we’ve put together thisspreadsheet to help you get started.
2. Misusing Credit
Your credit score reflects your ability to pay off a loan so you should set and follow clear rules for when you’ll use your credit card and how you plan to pay it off. Credit should not be your go-to strategy for purchasing necessities or covering gaps in your budget, else you’ll be causing harm to your credit score.
What to Do Next
Better understand your debt habits by taking an inventory of your current credit accounts and how you typically use them. Create a plan to pay them off and decide which ones you might want to cancel. Move towards debt relief by having a good mix of credit products.
3. Overusing Credit
Do you see debt as a convenience or a necessity? If it’s the latter, you could be heading for serious turmoil — especially if you’re paying high interest rates or putting up your assets for loan collateral.
What to Do Next
Notice how often you’re using your credit accounts and why. You might need to create abudgetandcompare your optionsto reduce or eliminate your debt — or simply be more conscious of when, why and how you’re choosing to use debt.
4. Poor Money Management
Your budget is only as effective as you allow it to be. It’s impossible to get ahead if you’re not matching your actual spending with what you’ve planned, only making the minimum payments on your debts, or borrowing from friends and family to make ends meet.
What to Do Next
Take a critical look at your spending and budgeting habits and put some structure in place that will allow you to reach your financial goals. Stop borrowing money if possible. Match every purchase with your planned spending throughout the month. And make debt repayment a line item in your budget
5. Lack of Budgeting Tools or Planning
Your financial strategy needs to cover more than just the next day, week, or month. If you don’t have a plan for how you’ll retire or weather an unexpected financial emergency, you’re gambling on your personal and financial future.
What to Do Next
Build emergency savings into your monthly budget — ideally saving three to six months of living expenses. Contribute to a Tax-Free Savings Account (TFSA) and / or Registered Retirement Savings Plan (RRSP) to fund your retirement goals. And review your life and asset insurance to make sure you have enough coverage in the event of an unfortunate incident.
6. Personal Issues
If you’re struggling with gambling or substance abuse, dealing with your own or someone else’s illness, undergoing a change in family status or worried about your job stability, these could all affect your ability to earn or hold onto your income.
What to Do Next
First, seek out help and support if you need it — either from a friend / family member or alicensed professional. If you don’t have an emergency savings cushion, begin building one now. And create a plan to pay down any outstanding debt you currently have.
7. Tax Issues
Whether you’re an employee or self employed, taxes can be complicated, time consuming and overwhelming. They can also get you in a lot of trouble if you don’t file them or you’re not prepared to pay what you owe — and remember, the government seems to always find a way to collect.
What to Do Next
Make the process easier by keeping clear and comprehensive records — and potentially have a professional complete your annual tax return. In the event you need a payment arrangement, connect with the government early to communicate your situation. If you can’t afford to repay a tax debt, aLicensed Insolvency Trusteemay have options to help.
8. Avoidance
Most people don’t avoid things that are going well or have the potential to work in their favour. So, if you’re ignoring phone calls, staying away from your online banking or blaming other people for your financial circ*mstances, that’s a strong sign you may need to address your financial difficulties.
What to Do Next
Take stock of your finances and debt situation to fully understand the cause, variables and implications of your situation. Determine what strategies you need in place to get where you want to be — a budget, a debt reduction plan, Bankruptcy or Consumer Proposal? TheMNP Debt Scalemay be a good place to start.
9. Creditor and Collections Action
If you’re habitually missing payments to the point where debt collectors are harassing you and threatening legal action, you must take action immediately. You may not be able to fix the situation on your own and risk losing assets and income as a result.
What to Do Next
Seek the advice of a Licensed Insolvency Trusteeto learn your options. They may have solutions that can halt all collections action, judgements and wage garnishments and give you a clear path to becoming debt free.
10. Co-Signing and Not Understanding Documents
The consequences of not knowing what you’re getting into can cause considerable damage to your (and other people’s) credit if you’re not careful. If you don’t know what your interest rate and payment terms are or the consequences for missing payments — or if you require a co-signer to guarantee your loan, these are signs you’re not likely ready for credit right now.
What to Do Next
Never sign any document you do not understand. Familiarize yourself with the interest rates, payment terms and fine print on every loan agreement you have and refrain from using any accounts that either don’t make sense or don’t align with your personal financial goals.
If you need a co-signer to qualify for a loan, focus on improving your credit first, rather than having someone else guarantee your debt.
Life-Changing Debt Solutions
If you missed any of these warning signs — or simply noticed them too late to prevent your debt from spiralling out of control — you’re not alone. MNP offers Life-Changing Debt Solutions to help you face your difficulties head on and get the financial fresh start you need and deserve.
During aFree Confidential Consultation, a Licensed Insolvency Trustee will review your financial situation, seek to understand your goals, and identify opportunities to help you eliminate your debt for good. This could includeBankruptcyor aConsumer Proposal, which will halt all present and future collections action and give you a clear path to becoming debt free.
A Licensed Insolvency Trustee may also be able to identify other resources, strategies and professionals who can help you better manage your finances and debt and build a more positive financial future. Whatever path you choose, they’ll help you make the most informed and best decision to achieve a positive resolution.
