There might be several signs that your finances need help. But like some people, you may ignore these signs and remain in a state of denial. However, getting a handle on your personal finances has a tremendous impact on your financial future. Even if you don't know much about personal finances or debt management, there are seven undeniable signs that your finances need help.
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1. Missing Due Dates
Whether it's utility bills or credit card bills, missing due dates is one of the biggest signs that your finances need help. Paying your bills late not only result in late fees, this can have a negative impact on your credit score. Creditors typically notify the bureaus when accounts are 30 days past due. This negative information can stay on credit reports for up to seven years.
2. Paying Bills with a Credit Card
If you do not earn enough money to cover all essential bills, you might use a credit card to buy groceries or pay other bills. This is a sign that your finances are in trouble. In all likelihood, you're living above your means. To get your finances on track, you might need to downsize your lifestyle or look for ways to earn extra money.
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3. Hiding from Creditors
Creditors can be very persistent. They may send collection letters to your home, call your home throughout the day and possibly call you at work. Paying delinquent accounts is one way to get a creditor off your back. Unfortunately, hiding from creditors doesn't solve the problem. This behavior can trigger a charge-off, a collection account or a lawsuit.
4. You Don't Have a Savings Account
How much do you have in a cash reserves? Is it enough to cover your expenses for one month, two months or three months? If you don't have money in savings, you’re ill-prepared to handle financial emergencies that can happen. This includes a medical emergency, a job loss, a car repair or a home repair. Take a look at your budget and look for areas to cut back. Take the savings and start an emergency fund.
5. You Rely on Payday Loans
A payday loan for cash advance might seem like a quick fix for short-term cash flow problems. However, these loans have extremely high interest rates. You'll pay approximately $20-$25 per every $100 you borrow. And if you can't repay the loan by the due date, you'll incur additional fees.
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6. You’re Tapping Your 401(k)
It's one thing to tap your 401(k) to purchase a home. But if you make a habit of dipping into your retirement accounts to pay bills, this signals a larger problem. Borrowing against retirement accounts reduces growth potential, plus you might get hit with a penalty and income taxes. Your emergency fund or cash reserve should be your go-to account when you need additional cash, not your IRA or 401(k).
7. You Can’t Qualify for a Loan
If you apply for a loan and the lender rejects your application, this is a sign that your finances need help. Contact the lender and inquire about the rejection. Additionally, order your credit report and check your file for accuracy of information. Once you get to the root of the rejection, you’re in a better position to improve your credit.
The fact that your finances need help doesn't mean that you're a bad person. In all likelihood, you simply need guidance and education. However, you have to let go of denial. What have you done to get your money on track?
