If the holidays have left you feeling financially worse for wear, you're not alone.
Marketing efforts by pay day lenders and loan consolidation firms peak this time of year as people try to "balance transfer" their way out of trouble. But personal debt crises usually don't come out of the blue. Red flags accumulate, often over years. Here are some of the warning signs you're in financial strife.
1. You avoid opening bills
Post holiday bills and credit card statements can be confronting, but letting them pile up shows you're in denial.
According to Izzy Silva, Veda's GM Consumer, keep communicating with your credit provider, and discuss a payment plan. "Don't shy away from opening the bills, or answering the phone, because that can turn into something more serious down the track," he says.
2. You have no emergency funds
Setting aside some rainy day dollars seems impossible when you're under strain. But MOZO's Peter Marshall recommends people try to scrape together at least three months' worth of funds to cover basic living expenses in case of calamities such as job loss, or illness.
"Having that buffer can help ensure things don't get out of control," he says.
3. You're using credit for basic living expenses
A finder.com.au survey revealed that 41.9% of credit card spending in Australia goes towards buying groceries and paying bills. But purchasing essentials like food and utilities with borrowed money suggests you're on a slippery slope, says Bessie Hassan, Finder's Head of PR Australia.
"If you cannot afford your groceries or bills on your current income, it's time to re-evaluate your spending," she explains.
4. You're missing credit card payments
It happens. According to finder.com.au, one-third of Australian adults have missed a credit card repayment, and more than half of those are repeat offenders. Yet the consequences range from small late fees to a savaged credit score, which makes it harder to get credit in future.
"Although it may initially appear as though you have got off scot-free, you can be sure that your creditor or bank will take action," says Hassan. Pay more than the bare minimum each month, and lower the limit on your card to reduce the risk of overspending.
5. You're using one line of credit to cover another
According to Kat Lane, Acting Co-ordinator of the Financial Rights Legal Centre, many people fail to consider their overall debt position, or recognise that debt is ultimately designed to be repaid.
"At some point you have to stop, and the earlier you stop, the better," she says. "Start living within your means."
6. You're taking out cash advances on credit cards
This strategy also makes it easy to hide financial problems, but only for a while. Marshall points out that borrowers are often slugged fees plus substantial interest rates of up to 20% per annum on cash advances.
"You're paying a lot of money for a short-term sugar hit," he says.
7. You've been refused a loan
If your loan application has been declined, it's a sign that things are serious. "If a lender is saying, 'No, I don't want you as a customer', then others will say the same thing and you'll end up in a place you don't want to be," says Silva.
Checking out your own credit file from a reporting agency like Veda can help you figure out what's turning lenders off. It might be a missed payment, or a default, of which you're unaware.
8. You're looking for cash in all the wrong places
The mere thought of visiting a pawn broker or pay day lender is an ill omen, because they will cost you more in the long run. "There are some decisions that show you've hit the end of the road," says Lane.
"You should never go to those people, ever." Instead, seek support from a free financial counsellor by calling 1800 007 007. "Their aim is to help you get back on your feet," she adds. "Don't drown alone – go and try to get a life buoy."
This article was originally published by The Age on 8 February 2017. It represents the views of the author only and does not necessarily reflect the views of AMP.
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