Signs of Financial Trouble and 5 Steps to Take
Signs of Financial Trouble and 5 Steps to Take
These days, it seems that finances are a taboo topic; and debt, as it seems, is the most taboo. We generally don’t talk about our financial situations with our friends and family and when we do it’s either on a surface level or only the highlights. In the age of social media where everyone is only sharing their best moments, best selfies and best experiences, it can be difficult to acknowledge our struggles.
We compare ourselves to our neighbours, our family, our friends and everyone else we see on social and regular media. The problem is, they may be hiding a myriad of trouble too!
How do you know if you’re in financial trouble? What are the signs and what can you do? It is important to take stock of where you are really at. Take this simple quiz below to determine early warning signs of financial distress:
|1- You do not have a budget or spending plan||Y/N|
|2- You can only make minimum payments on your credit cards||Y/N|
|3- You have borrowed money from friends, family, long term savings or a payday loan provider||Y/N|
|4- You use your credit card to pay regular monthly bills and carry balances||Y/N|
|5- You do not have savings for emergencies or long-term savings for Retirement||Y/N|
|6- You have refinanced your house more than once||Y/N|
If you answered yes to any of these questions, you may want to consider how financial action to improve your situation today. But what can you do to avoid financial ruin? Here are some simple steps.
Step 1: Acknowledge
Now that you are aware of the problem you can start to take action. Admitting to yourself that your financial situation is less than ideal is the first step - Congratulations!
Step 2: Take an Inventory
Take stock of your income, expenses, assets and liabilities. How much money do you bring home, after taxes every two weeks or each month? What are your fixed costs each month (rent/mortgage, car payment, loan payments, groceries, cell phone bill etc.)? List your variable costs each month (utilities, credit card and line of credit payments, eating out, clothing, entertainment etc.). Make a list of your assets (equity in your home, equity in your car, RRSPs, RESPs, Stocks, bonds, mutual funds, savings, gold etc.) Make a list of your liabilities (what you owe on credit cards, lines of credit, loans etc.)
Step 3: Review
Now that you know what your baseline is you can review the facts and see where you have room for action or changes. Do you need to increase your income? Do you need to lower some spending? Can you renegotiate interest rates or payment terms on your liabilities? This is a good time to chat with a professional like a Financial Planner, Credit Counselling Services or a Licensed Insolvency Trustee. Initial consultations are usually free, and the information is unbiased and objective.
Step 4: Plan
Create a plan of attack to get your life back on track and regain control. We have all been there at some point. You are not the only one and you certainly will not be the last person who needs financial advice. Most people don’t talk about it, but if you ask around you will see that finances and debt are something on the minds of many. This is common, you are normal. There is nothing wrong with seeking help. It’s like when you think you may have a medical problem. Once you see your doctor, run some tests and determine the source of the issue, you and your doctor can create a plan to deal with it. The number of options are as unique as each person. Your plan may be to make a few tweaks to your budget and track things more diligently. It may be to consolidate your debts into one payment or it may be a formal, legally binding agreement between yourself and your creditors through a Licensed Insolvency Trustee. The plan is as unique as you and must work for you.
Step 5: Execution
Take action and execute the plan. Find an accountability buddy if you are doing this on your own. Write your plan out and follow it, consistently. Break the cycle of debt, speak out and take back control of your own finances. It’s liberating!
If you believe you might be in financial trouble, you can call our Debt Relief Specialists for a free personalized consultation today at 1-855-884-9243 and press 1. Our Debt Relief team will help you review your income, assets and debts to make a recommendations on what might work best for your unique financial and debt reduction plan.
By Taz Rajan Community Engagement Partner at Bromwich+Smith
Taz has been in the finance industry for nearly 2 decades and has always been passionate about education and empowerment. Having declared bankruptcy herself, she intimately understands the shame, stigma surrounding matters of debt as well as the joy and relief that comes from restructuring. Taz actively works to normalize the conversation of debt through blogs, media interviews, webinars, lunch & learns and through building relationship.