To resolve your debt problems, it also helps to understand the importance of spotting warning signs that might indicate an impending cash flow crisis. Here are some suggestions for helping you avoid being over burdened with excessive consumer debt:
- Do you have a written monthly budget that itemizes all expected cash in and current payment obligations? This is much like a spreadsheet that has your income and expense categories running down the left column from top to bottom and then each column to the right representing your expected income and expenses for a month.
- It probably makes most sense to create this cash flow table along calendar year lines since that is how our tax year is calculated. This allows you to balance the total cash flow out with the expected (planned) cash flow in - and determine what excess, if any, you have. If you do not have a written monthly budget - then you are running your household, essentially, blind. When a desired purchase comes up - you don't have immediate visibility to help you determine if you'll be able to pay for this new purchase. As a result, often, the purchase decision is based upon emotions and wants - not the more practical "need" and "ability". Your wouldn't drive your car with a hood over your eyes - so don't pilot your financial ship "in the dark."
- Do you have almost no cash surplus left over at the end of the month? If your cash flow always ends up "breaking even" at the end of the month - then you're "not making it" - whether you think so or not. Throughout the year, other expenses besides credit card debt are accruing that you've forgotten about. Some are planned and others will be complete surprises. You may have property taxes, you may have a big car registration, you have Christmas and birthdays, you have insurance premiums - and so on. There are many "scheduled expenses" that don't occur monthly. Out of sight is often "out of mind" and so you don't plan for them when they arrive. In a way, they are a "surprise" expense that is actually "planned". You just forgot about it - but you wouldn't… if it was highlighted in a spreadsheet that could easily show you it was coming up. So, no cash left over is a red flag. An indicator that sooner or later, you are going to end up in financial difficulty.
- Do you have 8 or more Visa and Mastercards? Sometimes, you can acquire a bunch of them in a short period of time and it's like finding money - but without having to save money. All of the sudden - you have purchasing power. The small payments don't seem like much when you first start to use a credit card… but with 8 or more of them constantly being used, the monthly payments will add up and before long - you need credit card help.
- Do you have a significant number of revolving retail credit lines with department stores and gas companies? These are great "hidden cash flow" hogs. Easy to use - but you always have to pay them off. Watch out for high gas prices. Sometimes at the end of the month, it can look like you bought a TV instead of just filling the tank 12 times.
- Are your credit cards constantly maxed out? This is "proof positive" that you are unable to live within your means. An "available credit" balance should be regarded as emergency funds. Not discretionary purchasing power. Certainly we've all had our moments with the credit card. For some of us, however, it's a "lifestyle."
- Are you paying for food, gas and other consumables with credit instead of a checkbook. This is a real danger signal that indicates money problems are ahead. It says that you literally don't have enough money to buy food without going to credit. If you're unable to pay all of your credit card bills or if you do, there is nothing left for food - then you need to consult a credit management counselor.
- The same applies to utilities and other monthly consumable. With the exception of gas - "financing the purchase of consumables" raises a red flag that you are probably in serious trouble and are going to need financial help.
- What percent of your monthly take home pay do your credit card payments represent? Of course, this is one of the areas that US Debt Network concentrates on when helping you to become debt free. As this percentage climbs toward 25% - you are getting into the danger zone and want to strongly consider retaining a debt negotiation firm.
- Do you owe friends and family members small loan amounts? This is not only embarrassing - but can also cause dissension within the household. Taking out "personal" loans is another flag that your spending habits have outrun your ability to pay.
- Do you feel anxious if you haven't purchased something / anything within the past few weeks? We're not kidding. You would be amazed at how many people have unfulfilled emotional cravings to acquire material items. It's not unusual to find an occasional household with thousands of dollars in unwrapped purchases sitting on the floor of the closed or hanging from the rack.
- Are you a "showoff" spender? Do you like to be the one who always picks up the bills after lunch. Do you never forget someone's birthday and are you always the one who "remembers" with a gift - no matter how distant you may be from them.
These are just a few of the warning signs that you may be overloading yourself with excessive consumer debt. Even if you don't feel that you have a problem… yet. If a significant number of these warning signs are cropping up - it may be to your advantage to take a "proactive" stance and contact one of our Credit Management Consultants now.
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