People often don’t realize that they are heading for financial distress because they didn’t recognize the first signs of financial stress. It can be a pretty quick step from being stressed about money, to being in distress. Here are the warning signs:
- Worrying about your job.
Noticed some changes at work, and perhaps a few more people than usual leaving – especially the good ones? The best way to handle it is to start thinking ahead.
The best action plan is to build up your emergency fund to cover six months or more of basic living expenses, update your resume and get organized for a potential job search.
- There’s no money to save or invest.
If meeting basic expenses is a struggle and you have no savings or investments at all, it’s time for a serious review of where your money is going. Action plan: Start tracking what you are spending money on – work out where it is going, and then you can make a budget that will guide your short term decisions.
- You have disagreements with your partner about money.
Studies have shown that arguments about money are the top predictor of divorce. Action plan: Talk openly and share information about all the money issues and then start making decisions on how to tackle them together.
- You are paying bills late.
Late payments begin incurring extra costs and interest, and the problem snowballs. Action plan: Set up a calendar to keep track of payment dates and build that into your budget and planning.
- You imagine a windfall.
Waiting for a bonus, an inheritance or even a winning lotto ticket to ease your financial stress indicates you are heading into denial. Action plan: If your current efforts at budgeting, saving money or paying off debt aren’t working, get a professional financial adviser in to help.
- You use your home equity like a cash register.
Revolving credit loans or lines of credit can provide an instant solution to immediate spending requirements. Rising interest or debt costs can eat into your home equity – and house prices can fall too you know. Action plan: Either refinance if you qualify or stop using the line entirely until you can pay down the balance and get it under control.
- You’re considering a “hardship” claim on your KiwiSaver.
Think twice before doing so, it really should be a last resort. Apart from being harder to get than most people realize, it can almost entirely kill your retirement planning, but it is an option. Action plan: Get qualified advice to help you find another solution.
And we are here to help. If you are in financial difficulties you may not be able to afford to pay. We understand that, but if we can help you now we will. There are all sorts of "tricks of the trade" you may not know that we can share with you. Don't leave it till it's too late.
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