Seven signs you may be in financial trouble

Sometimes financial trouble seems to sneak up on you and turn your life upside down. But if you stop to think about it, debt doesn’t usually show up overnight — there are usually signs that you’re heading for financial trouble. The key is learning to recognize these signs and knowing what to do about them before it is too late.

Here are seven signs you may be in financial trouble:

• You don’t have a budget.
  A budget allows you to plan for how, when, and where you will spend your money. Not having a budget will lead to out-of-control spending, lack of savings, and less financial security. It also means you have a higher chance of going into debt or further into debt and will experience more financial stress overall.

• You’re not tracking your expenses.
  When you create a budget, you need to track what you spend your money on — especially variable expenses such as groceries, gas, and entertainment. If you are not tracking your expenses, then you won’t fully know what your real monthly expenses are, which will lead to overspending, missing bill payments, and being unable to set money aside for savings.

• You’re dipping into savings.
  Savings are used to build an emergency fund, save for retirement, and save for big purchases and financial goals. If your savings are decreasing because you use them for daily household expenses or to stay afloat, then you need to review your finances.

• You have no money by payday.
  If you find yourself coasting from one payday to another, it is likely because you do not have a budget and/or are not tracking your expenses properly. Not knowing where your money is going and where it should go will lead to overspending and missing or delaying bill payments.

• You’re relying on credit cards as a source of financing.
  Credit cards serve as a convenient method to purchase goods and services now and use money that is set aside to pay for them later. Given their typically expensive interest rates, they are not a good vehicle to borrow money that you cannot afford to repay. Carrying a balance near your credit limit and only making the minimum payments will result in a cycle of high monthly costs that accumulate more debt that require more credit card use to afford your essential expenses.

• You need assistance from friends and family.
  Asking for financial assistance from friends and family can be difficult. Not only might you feel shame in asking, but you may also worry about damaging the relationship if you can’t afford to repay your debt. While borrowing from loved ones may be a temporary solution to an ongoing financial problem, it’s important to recognize there is a problem and take steps to begin improving your finances.

• Your finances are affecting your personal life.
  If you are having trouble paying your bills, losing control of your finances, and accumulating debt, it may affect your mental health — creating symptoms such as anxiety, depression, and inability to sleep. The physical stress on the body can affect your ability to work or function day to day.

Minimizing future financial trouble

If you recognize one or more of the above signs, stop and re-evaluate your financial situation. Spend time working on your finances by visiting the local library or the Financial Consumer Agency of Canada. There is a wide range of educational tools to help Canadians manage their finances.

Don’t be afraid to ask for help. You will find that those who are successful with their own finances are often willing to share their financial habits, tools, and behaviours and they might help you change your circumstances.

Our website also has a range of self-service tools to help you manage your finances and assess your financial well-being. The MNP Debt Scale is one that you may find especially useful to understand how debt is impacting your overall financial health.

The tool is quick, easy to use, and completely confidential. It can help you determine not only whether your debt is getting in the way of your financial goals — but specifically where you’re struggling and what you can do to improve your situation.

You can also talk to a Licensed Insolvency Trustee to get a better understanding of how debt is affecting you and what you can do about it. In a Free Confidential Consultation, we’ll review your financial situation and help you determine which Life-Changing Debt Solution is best for your unique needs.