12/19/2012 3:00 PM ET|
Should you see a credit counselor?
4. You hide bills and financial information from your spouse
Cunningham calls this "financial infidelity," meaning you have a secret financial life apart from your spouse. You may have credit cards your spouse doesn't know about, or you lock purchases in the trunk of your car because you don't want your spouse to see you carrying them inside. You may even get your own post office box, so that if your spouse beats you home, he or she doesn't get to the mail before you can intercept it.
5. You're using cash advances or payday loans
This indicates you've created a lifestyle your income cannot support. Cash advances and payday loans come with sky-high interest rates, and using them will only dig you deeper into debt. "I see many people who are repeat users of payday loans, in which case they need credit counseling desperately," Jones says.
6. You don't know exactly how big your debt is
If you've lost track of how much you owe or to whom you owe it, Cunningham says you've "buried your head in the financial sand."
Says Vered: "A lot of times consumers will come in with a bunch of unopened bills in a plastic bag because they've gotten to the point where they're scared to find out how much they owe." If that's the case, it's time to face the facts. Delaying the inevitable will only do more harm.
7. You're maxing out your credit card each month
Some may do this because they like to spend money, but consider talking with a credit counselor if this is the only way you can pay your bills. Maxing out your card damages your credit scores, as it raises your credit utilization ratio -- the ratio of your credit-card balance to credit limit -- which credit experts say should be kept under 15%.
8. You're pulling money from a retirement account to pay bills
Dipping into a retirement account should be a last resort, as you'll incur substantial penalties and fees for early withdrawal. Says Cunningham: "A retirement account is appropriately named -- it's for your retirement, not for your daily living."
Although the Bosticks found the help they needed, they shouldn't have waited until they were in six-figure debt before consulting a credit counselor. If any of the above applies to you, reaching out to a credit counselor could do you and your finances plenty of good.
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If you wake up one day when you're in your late 50's or 60's and 'discover' you are 'suddenly' in debt to the tune of $120,000 on credit cards, it can only mean one thing: You have been engaging in Irrational and/or delusional decision making. In order to get yourself in $120k of debt, you have to SPEND that money on 'STUFF'.
What could these people be thinking? Approaching retirement age, and spending huge amounts of $$$ on non-essential things like vacations, dining out, and expensive car loans is the fastest and easiest way to get yourself in REAL financial trouble, and ruin your retirement years.
An incredible lack of discipline and planning are usually responsible for this extreme debt example. It's the 'keeping up with the Joneses' mentality that will destroy you every time. How? Francine and Jim observe their neighbor's and family and friends taking cruises and going to Vegas 'for the weekend' and say to themselves, "Why shouldn't we do that? After all, we work hard and we deserve it..." Except that they DON'T really have the money to live that lifestyle whether they 'deserve' it or NOT! But, that little voice in their head tells them, 'don't worry - be happy!' And off they go...
The real shame of it is, that these kinds of decisions can lead to very difficult situations and scenarios that might involve friends and family when their undisciplined lifestyle implodes on the perpetrators. If they lose a job or have an illness they can be faced with foreclosure, homelessness, and disaster. What is the mental mechanism that some use to justify and rationalize this kind of behavior? I'm not able to read minds, but this lifestyle has been more prevalent over the last few years.
Preventing this from occurring in your life is NOT difficult or complicated. Exercise some self-limiting behavior. Think before you purchase. Then think again... Do I really NEED this item? Is going out for dinner three or four times a week really a good idea? MUST we take this elaborate vacation? And, maybe the best example: Do I really NEED a Starbucks twice a day?
The simple answer is usually - no. Instead, have some discipline. Save some money. Pay yourself first. Have an emergency fund ready in case of unexpected expenses. Invest in your future. (No, a credit card does NOT qualify as an 'emergency fund') In my experience, delayed gratification is always more satisfying than instant gratification. Especially when you can truly afford it... IMHO.
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