20 Signs Your Personal Finances Are In Tatters

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It’s payday next week, and the time just isn’t going quick enough. You’ve already earmarked a dozen things you want to buy, and then there’s those nights out with your mates you planned – now you can finally afford a few drinks… or can you?

Taking inspiration from Free From Broke’s article 25 Traits of the Not So Well to Do, The Credit Letter looks into ways of recognising you may be in financial diffs, but haven’t quite realised it yet.

The ability to splurge can, for some people, be overwhelming. In fact scientists concluded this year that spending money can be like a drug. The act of willingly parting with your dosh stimulates the reward centres of the brain normally associated with addictive activities. So, when people say they feel better after a spot of retail therapy, it’s easy to see why. It’s also easier to understand why, when you actually have very little excess money each month – and you know you can ill-afford a spree – that you spend it like you’re loaded.

But how do you know when you’re verging on the brink of becoming a shopaholic? If a few of the points below make you shout out, “Hey, that’s me!” then you might need to rethink your lifestyle choices and spending habits.

1. Budget? What Budget?

Being unable to stick to a budget can have a devastating effect on your finances. If you have no idea what you’re spending in relation to your income, it means you will end up with nothing, or very little, left over at the end of the month. High-earners are just as likely to run into trouble, even if they think they don’t need to keep an eye on their expenditure. Those who earn more seem to be more reckless with their money – they splash the cash in an effort to be seen as affluent, often totting up huge amounts of debt as a result. Just look at those celebs who, even though they were earning silly amounts of money, still managed to become bankrupt.

2. Your Ability to Save is Non-Existent

You can’t remember the last time you had money in your savings account – well, you’ve been having too much fun shopping to worry about savings, yet that niggling voice at the back of your mind telling you to save for a rainy day can’t help ruining your fun. In the current economic downturn, it’s a better time than ever to try to put some money away, as you never know what’s going to happen in the future. With so many people being unexpectedly unemployed, it’s not a bad plan.

3. You Have No Emergency Fund

The car has just broken down, the cat needs to go to the vet and the water bill is due – things always happen in threes – but you haven’t a penny set aside to pay for anything, so ‘wham!’ onto the credit card goes the cost. A lack of savings is one thing, but having no extra funds for unexpected outgoings makes it even harder to keep your finances in check.

4. You Overuse Your Overdraft

If at the end of every month you end up in the red, it’s not a good sign. While it’s tempting to use your overdraft every month, it’s important to try and kick the habit. But stopping a bad habit in one fell swoop isn’t always easy. Instead of going to the spend limit every month, try to leave $100 untouched. Then the next month, don’t spend $200, the next $300, and so on. Once you’ve managed to ignore $500 ring your back and ask them to reduce your overdraft, that way it won’t be there to tempt you into using it again.

5. Baked Beans Have Become Your Best Friend

If you’re not a student and you find yourself serving up baked beans on toast every night for dinner at the end of the month, there’s something seriously wrong with your spending habits – that is, unless you’re totally addicted to baked beans. Having very little money at the end of the month to be able to afford decent meals means you should probably redo your budget.

6. Your Credit Cards Are Maxed Out

If, like a lot of people, you find you’re searching for the yet another credit card but you’ve yet to pay off the ones you already have, then it’s time to start rethinking your card habits. Sure, when you get them initially you’re convinced that you’ll pay everything off within a year, but when it’s three years and five credit cards later, you’ve got to admit you may have a serious problem.

7. You Pay Mortgage/Rent On Your Credit Card

You know you’re on a slippery slope to financial hell when you have to pay for your rent or mortgage by credit card. It’s just wrong. As soon as you find yourself even thinking about having to take such drastic measures it’s time to ditch those nights out and expensive tastes.

8. You Borrow Money from Others… Every Month

While most of your mates would happily sub you a few dollars every now and again, becoming a sponge just isn’t cool. And what’s worse is, yes you’ll be able to pay them back the next time you get paid but it will leave you just as broke at the end of the month, leading to a never-ending debt circle.

9. You’re a Regular at the Bookies

While it’s fun to have a little flutter here and there, you know you’re in trouble when you’re asking to borrow money, convinced you’ll win it back, which rarely happens. Gambling websites and casinos are designed to be the big winners in betting, so don’t be fooled, you’re only throwing your money away.

10. You Choose Fashion Over Funds

You’re a sucker for the latest trend. You have no idea how much you spent on your wardrobe, your car, and just have to have the newest gadgets on the market, but can ill-afford any of it. Although it should bother you that you can’t pay your credit card bill this month and have no savings to talk of, it doesn’t. Are alarm bells ringing?

11. You’re a Shopaholic

You are a self-confessed non-stop shopper. You’re constantly shopping for the essential item to go with …, love shopping on-line, in stores, over the phone. You have clothes spilling out of your wardrobes, shoes in boxes under the bed, and many clothes with the tags still on, yet to be worn. Whatever way you can, you’ll shop till you drop… or till the debt collectors come banging on your door.

12. You Have a Bad Credit Rating

You may have missed a couple of mobile phone payments, or just one credit card payment, you may not even been entirely sure why, but now you’re stuck with a bad credit rating. Poor ratings can lead to difficulties in borrowing money. This can be problematic if you need a contract for a phone, or mortgage etc. This kind of black mark on your name is easily fixable; 1) Pay at least the minimum payment to all your debtors, 2) Speak to them directly to organise a payment plan.

Sometimes people have bad credit ratings because they’ve never borrowed money before. This makes it extremely difficult to get credit with practically anyone who lends money – they want to see you’re true to your word and pay back when due. If this sounds familiar, register for the electoral role, and at the time check that there aren’t any errors i.e. wrong addresses, then get a credit card and start borrowing. It can take anything from 6 to12 months for your credit rating to change, so be patient.

13. You Take Advantage of Buy Now, Pay Later Deals

You got a bit excited and signed up all your new goods for your new flat to buy now, pay later deals, problem is you know there’s not much chance of you having the lump sum required at the end of the term to pay off all the goods in one go. This is where businesses make their money. They know this is bound to happen with most people, so the interest rate jumps from 0% to around 30%, meaning many of the items will cost a lot more in the long run, and not such a good deal after all.

14. You’re an Impulse Buyer

Do you walk into a store and come out with an unplanned purchase? A large percentage of purchases in supermarkets never appear on the customer’s original shopping list. Try and be aware of the tell tale signs that make you buy without thinking – when you’re hungry, during the sales etc. If you know what entices you to impulse buy, then you can curb your shopping appetite.

15. You’ve Been Threatened With Bankruptcy

If you default on payments due to a particular creditor, they may present a creditor’s petition. This means bankruptcy proceedings are underway. Even if you dispute the claim, you need to follow proceedings accordingly, and try to reach a settlement before the petition’s due – otherwise doing so later can be very expensive. If you do get made bankrupt, you will lose your main possessions i.e. your house. The only goods you can keep are those relating to your work, such as, van and household necessities for you and your family. Pretty heavy stuff!

16. You Need to Move Back in With The Parents

Your worst nightmare is about to come true – you’ve been living on your own for years now, but things have gotten so bad financially that the only way you can claw your way out of debt is to move back in with your parents. Not the best year of your life, but has to be done sometimes. And let’s face it, most parents are more than happy to welcome their chicks back into the fold when the going gets tough, just don’t get too comfortable.

17. You Choose Cubic Zirconia over Diamonds

You have to convince your bride-to-be that although you can’t afford that exquisite ring she’s been pandering for in the shop window – your love is a love that lasts a lifetime. As for the wedding, you like the idea of a long or to be more precise, a very long engagement.

18. You Want to Book a Holiday Abroad

You’re sorely tempted to book a week in the Bahamas – well, you’ve been so stressed worrying about your finances, a little break would do you the world of good. Wouldn’t it? … Er, no. Never going to happen. The only place you can afford to swim in right now is the local pool. Oh well, at least it’s a cheap way of getting fit!

19. You Start Selling Your Belongings to Raise Cash

The lounge is looking sparser by the minute as you’ve sold anything that will raise some money. You’re not sure what else you can sell in order to make ends meet, but more worrying is that your flat mate is due back from holiday any minute and you haven’t quite figured out what to tell them yet. It may be a good time to have a chat with your parents about getting your old room back!

20. Bad Deals Start to Look Good

You know it’s really bad when the dodgy adverts on TV start to look appealing. Lately, there have been questionable ads for ways to make money from your old gold jewellery. All you need to do is send your unwanted gold in an envelope to the address provided on screen, and they’ll send you a cheque in the post for the amount your discarded gold is worth. Yep, you read correctly: you send all your gold to them first. Dodgy dealing was never so transparent. Don’t fall for it.