3 Warning Signs Of Falling Into Financial Difficulty

Everyone dreams of attaining financial freedom. This means paying all bills on time, having a robust savings account and cash on hand, while still having money to spare to put towards financial investments. Simply put, it means the money is working for the person rather than the other way around.

Some people are able to reach this lifestyle, while many are burdened with increasing financial debt and obligations. To learn more about the danger signs that can put one in financial difficulty, read the list below:

1. Payday loans

Payday loans are small-dollar loans with a term due in a single lump payment. They are used when someone has more financial obligations than income and cannot get a bank loan or ask for help from friends, family, or acquaintances. Other names for these types of loans are cash advance, bad credit loan, paycheck advance, fast cash, and short-term loan.

These loans target people with poor or no credit who need access to cash right away. While they are easy to access and come with fewer requirements than other loans, they are oftentimes harder to pay back than traditional ones because lenders do not verify the loanees’ ability to repay. Since high costs can escalate quickly, it is easy to get trapped in a cycle of debt.

2. No savings

The habit of saving money regularly takes discipline and hard work, and it is important for one’s peace of mind. Saved money can be used to pay off debt, buy a home, make an investment, or put away for retirement.

Before credit cards were accessible, a good rule of thumb is to have at least two months’ worth of income in the savings account in case of emergencies or unexpected expenses. For instance, anyone with a house or a vehicle should expect repair and maintenance costs as well as significant and unexpected changes to happen at any time, such as job loss, disability, or major illness. However, many would not be able to afford those emergency expenses.

Getting out of debt is tough, but making sacrifices in the budget is necessary. It also makes sense to pay off debt first before beginning to build savings. Seeking debt relief is an effective way to stop struggling with debt by getting financial counselling from experts, being helped with a budgeting plan, and finally living a less stressful life free from agitated creditors.

3. Making minimum monthly payments

Paying the minimum monthly payment is another sure sign of facing financial difficulties. This also involves using credit cards as a line of credit. However, the interest rates range from 14 to 25 percent, which means it can take years to settle the debt.

Paying the minimum payments can be tempting, especially if the budget is tight. However, paying less now means being in debt longer and paying more later due to massive amounts of interest.

Conclusion

Being free of financial difficulties can be challenging due to poor money management and other reasons. However, by working and planning hard to avoid experiencing the warning signs listed above, anyone can attain financial freedom and gain a debt-free life. Seeking professional advice is also one of the best ways to start. 

DebtHelpers.ca consist of debt consultants in Canada who offer a wide range of consulting services and debt solutions that help anyone live debt-free. Get in touch with us for a free consultation!