Everytime I tidy my house, it strikes me that it takes such a short period of time for things to get in a mess yet tidying them up again is such a lengthy process. The same goes for our finances, getting into debt can happen practically overnight yet people can spend their lives trying to get out of it.
You may be able to empathise with that sinking feeling in the gut as the credit card enters the machine, desperately hoping that it will not get declined. An obvious symptom of debt racking up, though often we do our very best to put it to the back of our minds and focus on anything but the dreaded D-word.
However if burying your head in the sand was actually an effective method of dealing with debt, millions of us would be in a much better financial situation. Ignoring your debt can leads to a debt spiral which often results in bankruptcy, repossession or other nasty outcomes. If the following three symptoms of debt denial sound familiar, it’s probably time to pull your head out of the sand and take action before it’s too late.
1) Bills? What bills?
Out of sight, out of mind? Wouldn’t life be much easier if we could tuck unopened bills away in drawers and they just went away? Yes, it would. It would also be a lot easier if we could walk into our garden every morning to find that our tree hand sprouted fresh new leaves in the form of big cash notes. Sadly neither of these things is ever going to happen.
The longer you leave bills unpaid, the bigger they are likely to grow and the more unmanageable they are likely to become. You may also start to lose payment privileges; for example many companies will allow you to pay off bills in manageable installments if you discuss this with them however if you ignore their correspondence, you could end up having to meet the full payment and charges in a lump sum or be threatened with court action, debt collection agencies or even repossession.
2) You pay for everything on your card but never check your statement
Not carrying cash might work for the Queen but she probably hasn’t got a rapidly approaching credit limit to think of. Of course, many people choose to pay for things on card as it is often the safer option than having large amounts of cash in your possession but it can also make it more difficult for you to monitor your spending.
With cash you know exactly how much you’re spending and exactly how much you’re left with. When it’s run out, it’s gone and there’s no overdraft. Card spending can be more difficult to manage especially if you use a number of cards. Therefore it is essential that you regularly check your bank statements and acknowledge where your money is going. Could frequent appearances from ‘Dominoes’ or the local club be cut down to help you pay off some of your vital household bills?
Another option to manage your weekly spend could be to withdraw a set amount of cash for the week and keep it in a locked safe, attributing yourself a small amount per day for the necessities. This forces you to think carefully about what you are buying and means that the finances in your bank account can be used for the essential outgoings.
3) You’re paying debt off…with more debt
If you’re taking out new borrowings in order to pay off old debts, it’s likely that there is problem. It may seem like there is no other way but all the while you are doing this you are racking up more and more interest and getting sucked further into the debt vortex. If you are obtaining new financial products without paying those or your existing ones off, it is likely that you are just a credit card application or two away from being turned down any more credit.
Help yourself by facing up to your credit report as painful as it may be. By looking at the damage, you will be able to see how close to the brink that you are before you fall and it is too late. Many people do not realise that there are a number of debt charities who can offer expert help on how to manage your debts, free of charge.To get the most out of your finances and to keep them in order in the first place you may wish to seek the guidance of a financial advisor who can talk you through planning ahead and finding the most suitable financial solutions for your needs.
Put all your bills on automatic draft. Use the envelope system if you are having trouble disciplining your spending habits. Done.
The third one is a huge read flag. Once you start borrowing to pay money you borrowed, you need to make some changes. A simple balance transfer is not horrible, but if you start using convenience checks as cash, things are bad!
Great reminders. I definitely need to take more time to look over my statement and verify expenses. Thanks!