Signs of Having Financial Problems (Part 2)

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Let us continue our discussion on the seven (7) signs that tells you that you are having financial problems.

On my last post, we have discussed the first of the seven signs which is having a zero savings. We now understood the importance of having a savings account. We keep a portion of our salary or income each month and save it for the rainy days.

Now, we will tackle the rest of the signs.

2. You Need Your Credit Card To Pay For Your Basic Consumption

You know that you are experiencing financial problems when you use your credit card to pay for your basic needs. I have seen this many times, buying an item that doesn't cost that much and yet there are people who use their credit card to pay for them.

When we say basic consumption, it means your basic needs like groceries, toiletries, gasoline, utility bills like mortgage, water and electricity bills. These basic needs are part of your monthly budget, they should have been allocated a portion from your salary already.

Why pay them using a credit card when you can pay them in cash? Unless you are having trouble keeping your cash.

This is my advice to you, after receiving your salary, set aside first the 10% for your savings. Do not list your savings at the last part of your monthly budget because you will end up spending those. So after setting aside 10% for your savings, try to compute your monthly consumption like groceries, toiletries, gasoline or bus fare, mortgage, credit card bills other utility bills. When you have a deficit, omit those that are not a necessity meaning you won't die without having them. If in case you have extra left from your salary, you can use that for your recreational "needs" like going out with friends. If you have none left, then you can postpone your dates with your friends. Certain sacrifices have to be made to insure your freedom out of your financial problems, especially with your credit card debt.

3. You Have Used Your Maximum Credit Limit Of Your Credit Card

Here is another sign that you are having financial problems. Using your credit card to its maximum limit will really cause problems to your finances. How will you be able to pay your credit card debt when you have used it to its maximum limit? When you're only paying the minimum due payment per month, how will you pull yourself out of your credit card debt?

To avoid this catastrophe, again, purchase what you only need. And if you can't help but splurge, make sure that you will pay the exact amount that you used, not the minimum amount due so to avoid interest.

4. You Only Pay The Minimum Monthly Payment Dues Of Your Credit Card

As mentioned in the third sign, because you are spending way to much than what you can pay, when the credit card bill arrives, you opt to pay for the minimum amount due because you don't have enough money to pay the exact amount. By doing this, you are only paying the interest and not the principal amount. Therefore, it will take you an even longer time to pay the whole amount of your credit card debt. If you have observed, the more you pay for the minimum amount due, in the next bill, your payment doesn't make that much difference.

My advice, if your company gives you bonuses (those are considered "extra" income), payment all of it to your credit card debt. As soon as possible, settle your credit card debt so to avoid being eaten by interest and to be free from your credit card debt.

5. You Use Your Other Credit Card Cash Advances To Pay Your Other Credit Cards.

This is very common to those who owned more than one credit card. When its time to pay the other credit card that is due this week, you use your other credit card's cash advance to pay what is due. Don't you know that cash advances has a higher interest? By doing this, you are putting yourself in too much danger of financial problems. Do not use other credit card's cash advances to pay for your due credit card bill. It will only worsen the situation instead of helping you.

6. Your Frequent Callers Are Debt Collection Officers

This is what happens when you no longer have enough to pay for your credit card debts. Every day, Debt Collection Officer will hound you. They will call you at home and if you are not home, they will call you in the office. They will not stop until you settle your credit card debt. This will cause you too much stress, believe me.

Solution? Talk to the these debt collection officers. Tell them the truth that you no longer have the capacity to pay for your credit card debt. Negotiate with them new terms of payment and if possible have the interest stop. They will probably offer you a fixed monthly amount due payable for 12 months. If you are offered with this, please be vigilant to pay every month.

7. Your Issued Checks Bounced.

When you are under financial problems, it would only mean that you are tight on money. If you are, do not dare issue checks especially when you are sure that it will bounce. When issuing a check, make sure that your checking account has money otherwise, a bouncing check will sure cause trouble for you, including legal trouble.

Now that you now the seven signs of having financial problems, if you have not experience those yet, then try to avoid them. Control your spending habits. Purchase only what is necessary. And Learn to save for the rainy day.

What is a Credit Card?

Let us first re-orient ourselves on what is a credit card; Its advantages and disadvantages; Because there are a lot of misconceptions people made on credit cards, thus, the reason for all this credit card debts. Read on.

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The plastic credit card with a magnetic strip many people carry in their wallets or purses is the end result of a complex banking process. Holders of a valid credit card have the authorization to purchase goods and services up to a predetermined amount, called a credit limit. The vendor receives essential credit card information from the cardholder, the bank issuing the card actually reimburses the vendor, and eventually the cardholder repays the bank through regular monthly payments. If the entire balance is not paid in full, the credit card issuer can legally charge interest fees on the unpaid portion.

Credit card use often becomes problematic when the holder accrues more debt than a regular monthly payment can cover. The issuing bank does allow credit card users to carry over balances every month (revolving credit), but significant interest rates may also accrue on those balances. Missing a scheduled payment can also prompt the bank to raise interest rates on a delinquent account. If a credit card holder can only afford to pay the minimal amount due every month, he or she will not be reducing the actual debt incurred. The minimal payments may only apply to the accrued interest. This is a financial spiral many credit card users may experience if they don't use proper spending restraint.

A credit card is not a requirement for successful living, but even those who only pay for goods or services with available cash often find a credit card to be a convenient form of identification and instant credibility. In order to avoid excessive credit card debt, the holder must decide if the goods or services are worth the added expenses.

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