There are many indicators of financial distress. Fortunately, there are also ways out, and in the following article, we’ll show you how to get there. You pull up to the mailbox afraid to open it. After all, it’s probably just going to be full of letters from debt collectors that you are trying hard to avoid. Then your phone rings and you don’t even want to look at it because you’re almost certain it’s another bill collector calling again. Does this sound like your normal daily life?
According to CNBC, the average American owes $28,900 in personal debt. Even if you don’t owe that much, chances are you owe a lot if you’re experiencing debt-collection letters and phone calls each day.
Are you tired of living like this and are you ready for a way out? Let me help you learn the signs of a person who is in financial distress, and let me explain to you some of the options you can use to get out of the mess you are in.
Financial Distress Indicators
1. You’re Living Paycheck To Paycheck
Do you live paycheck to paycheck? If so, you’re not the only one. According to a recent report, 78 percent of Americans live in this fashion. Living paycheck to paycheck doesn’t automatically guarantee that a person is facing financial distress but it certainly is a factor that people in financial distress face. One of the biggest problems with living paycheck to paycheck is that you literally must use the entire paycheck to get by only until your next paycheck arrives. A second problem with living like this is that you probably have no money in savings to turn to.
2. Financial Distress Means Your Entire Paycheck Goes Towards Bills And Debts
A second sign is using an entire paycheck for bills and debts. After you receive your paycheck and pay your bills, is there any money left over? If not, how do you pay for groceries, gas, and everything else you need to buy?
The amount of money you have after paying your bills is called your discretionary income. This is the money you can use for all the extra things you need to buy, and it is also the money you use for savings and luxury items.
When you reach a point where you have no discretionary income, you are at a point of distress. At this point, you’ll probably use your credit cards to buy the things you need, like food and gas for your car.
3. You Cannot Even Pay Minimum Balances On Debts
Another one of the indicators of financial distress is not having enough money to even pay minimum balances owed on your debts. When you reach this point, you’ll likely stop making payments on certain debts, and this is typically when the debt collectors start calling.
4. You’re Transferring Balances From Card To Card
There is a way to “get by” when you’re facing major financial problems by transferring balances from one credit card to another but this will only work for so long.When you begin transferring balances, you gain a little bit of time but you also rack up more debt. Balance transfers are not free and using them does not pay off any debt. If you’ve been using these for a while, you’ll reach a point when this method doesn’t work anymore. You’ll no longer have any credit cards to transfer your balances to, and you’ll probably fall behind on the payments on some of them.
5. Your Credit Lines Are Maxed Out
When you hit the point where you have no more credit, how will you pay for the necessities in life if you’re used to using your credit cards for this purpose? If your credit lines are completely maxed out, it’s a good indicator that you’re at a point where you need help.
6. You’ve Exhausted Your Emergency Fund
Another sign of distress is exhausting your emergency fund. Have you drained every savings account you own? Do you have any cash left? If you have no money on hand to use, the only option you’ll have to pay for things is by charging the purchases. If you have no credit lines available, you’d be in quite a predicament.
7. Creditors Are Calling And Sending Letters
When you start experiencing some of the signs we’ve already talked about, you’re likely to begin missing payments on debts. As soon as this happens, you can expect your phone to start ringing and your mailbox to start filling up. Debt collectors can be relentless when trying to collect money owed yet there’s not a lot you can do if you don’t have any cash to use to pay them. When they call, and they will if you’re past-due on your debts, make sure you learn the best techniques to use for handling these conversations. Using the right methods will help you at least get through the phone calls.
8. You’ve Used All The Equity In Your Home
If you took out a home-equity loan on your house, this could also indicate financial problems, especially if you have no equity left in it. Instead, all you’d have is a second loan to pay for. Great, one more bill that you can’t pay.
9. You’re Starting To Turn To Risky Loan Types
The last sign I’d like to share involves the use of risky loans. Risky loans include payday loans and car title loans. These are easy types of loans to get, as long as you have a job, but they’re horribly difficult to get out of. Falling into the risky loan trap can be a nightmare for anyone, and it can be a good indication of financial distress.
How many of these signs are you facing right now? Even facing just a few of them can indicate a financial state that you should view seriously and consider getting help for.
The Ways Out Of Financial Distress
A lot of people end up living in a financial mess for much longer than they need to, and there are several reasons for this. One, some people are afraid or even embarrassed, to get help. Two, many people do not know there are ways out. Three, some people believe that there is not a single good option to use to get out of debt.
The good news is that there is no reason to be afraid or embarrassed. There are ways out, and there are good ways out. Here are a couple of options you could consider:
Debt Negotiation
Debt negotiation is often a good tool to evaluate when you initially begin looking for a way out of your debt problems. The basic principle behind this option is finding a way to settle the debt you owe for a portion of the actual balances.
Through this option, you hire a company to work out settlement plans with each creditor you owe money to. Creditors prefer this option over others because they will at least get part of what is owed to them instead of receiving nothing. The benefit for you is that you can satisfy your debts by paying just part of what you really owe.
Bankruptcy
A second option you could turn to is bankruptcy and there are three branches you could choose from:
- Chapter 7 – This branch involves a discharge, or forgiveness, of debt and is ideal for people who do not earn large incomes but have A large amount of unsecured debts.
- Chapter 11 – This is a unique branch of bankruptcy that allows you to reorganize your debt in a way that makes it easier for you to repay it.
- Chapter 13 – This is a branch that offers a way to repay debts you owe and works great for people with steady and larger amounts of income.
Bankruptcy can make a world of difference when you’ve reached a point of desperation and have nowhere else to turn. It’s definitely an option to even if you end up choosing a different avenue.
The Importance Of Budget Education Afterward
No matter what method you choose to use, there is one vital step you should take afterward – learning how to budget. Using proper budgeting skills and habits can help you avoid falling into debt again in the future, and it may also help you develop better habits and strategies for saving more money. If you are unsure of how to even begin a budget, get help.
Get A Free Evaluation To Find Out The Best Option For Your Situation
Falling into a position of financial distress happens to so many people but there is help available when you’re ready for it. Instead of spending one more day wondering how you will pay your bills or being afraid to answer your phone, let us help.
Contact us today to find the best way for you to find relief from your debt.
