Are you keen on knowing if you are financially stable? People worry about their finances all the time for obvious reasons. You can’t be able to live a comfortable life if you don’t have money. It also takes money to elevate your lifestyle. It’s important to understand the difference between lacking access to money and being broke. You should also appreciate the fact that money is scarce. However, how do you tell when things are seriously going wrong?
1. Your expenses are more than your income:
If you spend more than you earn, you are already in serious trouble. Your income should be more than your expenses otherwise you are living beyond your means. You need to cut down on your expenses immediately to avoid serious financial trouble in the future. You should consider downgrading your lifestyle immediately. For instance, move to a cheaper house, take a bus/train to work, shop for discounts, etc. Your expenses should never exceed your income.
2. You borrow to fund recurrent expenses:
If you take out payday loans among any other types of loans to fund recurrent expenses such as; food, rent and transport expenses every month, you are already financially unstable. Loans such as payday loans are meant for funding emergency expenses. Using them to fund your lifestyle is a scary sign of financial instability.
3. You don’t have savings/an emergency fund:
You can never be financial stable if you don’t have savings. An emergency fund is highly recommended for taking care of unexpected expenses. You can lose your job or get into an accident that affects your ability to work. Without an emergency fund, you can’t be able to survive without taking up loans from friends/family members. If you don’t save/have an emergency fund, start setting up one today.
4. Your debts are greater than your assets:
You can take loans as long as you are in a position to repay them. Loans become a problem when you can’t afford them when the worst happens. If you lose your job for instance, can you be able to pay for all your loans with your assets and still have some money for subsistence? If not, you are not financially stable. This highlights the importance of investing the money you get from loans wisely. If you use loans to buy assets, instead of liabilities, your assets will always be greater than your debt.
5. Your credit score is dropping:
Your credit score tracks all your credit activity. If your credit score is increasing, it simply means you are using your debt wisely. If your credit score is dropping, this is a sure sign that you are engaging in dangerous credit activity such as; misusing your credit cards, defaulting on debt, etc. The ratio of the amount of money you owe over your available credit (i.e. credit utilisation ratio) should not exceed 30% otherwise you will start hurting your credit score even if you make all payments on time. Overusing credit is a scary sign of financial instability even if the credit is available to you.
6. You lose sleep over your finances:
Financial problems are bound to cause stress. However, you should be overly concerned if you lose sleep thinking about your finances. It is advisable to seek financial help if you find yourself worrying too much about money. A financial expert can help you identify your financial problems as well as craft ways of dealing with them effectively. If you are already losing sleep over your finances, seek help immediately to avoid worsening your finances as well as physical health.
7. You have considered debt management/bankruptcy:
Debt management and bankruptcy are measures taken as a last resort when debt spirals out of control. If you have thought about debt management or filing for bankruptcy, you are already financially unstable. People usually contemplate these measures before taking them, so it’s a sure sign of financial instability. You can avoid these measures by seeking financial help immediately.
People don’t find themselves in financial problems overnight. There are common signs to look out for if you want to know the status of your finances. Discovering the scariest signs of financial instability is important because you have the opportunity to take the necessary measures and change your fortune.
Is the Company Director of Swift Money Limited.
He oversees all day to day operations of the company and actively participates in providing information regarding the payday/short term loan industry.