Person taking a penny from wallet - Bankruptcy

Most people have had that moment where they realize that they are in financial trouble. Some people take a while to come to this conclusion and may even be in denial about it. Here are 7 signs that your finances are in serious trouble, and you are in desperate need of a major financial overhaul.

7. Maxed Out Credit Cards

Are you one of the millions of people who has a wallet full of plastic? If you have multiple credit cards, you need to be aware of the cards that still have credit and the ones that are maxed out. If most of the credit cards are maxed out, then you need to get them paid off while keeping the one that offers you the lowest interest rate. In essence, maxed out credit cards and mountains of revolving account debt are the two key determinants that you are in real financial trouble.

6. Borrowing Cash from Friends and Family

Just about every person at some point has had to borrow $10 for gas or $5 for lunch, but if you are finding yourself asking friends and family for hundreds of dollars to make ends meet until your next payday, you are probably in real financial trouble. When your bills start to be more than your monthly income, then you need to determine which ones you can eliminate.

5. Short Term Loans that Turn into Revolving Loans

Short term loans, or payday loans, are loans that are generally only a couple of hundred dollars and are paid back on the following payday. This sounds great to help people pay for unexpected expenses like overdue bills, car repairs etc. but they often turn into a nightmare. What people don’t see is the high interest rate that usually tacks on $100 onto the initial loan. So, when you borrow $400, you will actually have $500 taken out of your bank account on your next payday.

When people cannot afford the finance charge, they often take out another payday loan to pay off the first one. This becomes a carousel that keeps going around until you can’t get off. If you have had to take out two or more payday loans in the last 6 months, you need to give your personal finances a full overhaul.

4. Late Payments/ Disconnect Notices

Have you come home to find the dreaded shut off notice on your door or do you pull up into your driveway hoping one is not there? If you have become so past due on your bills that you have had, or are at risk of having, your utilities disconnected, then you are likely in very big financial trouble. You need to figure out where you can cut back and what are necessities. You need to keep the necessities and cut out the luxuries until you get your finances under control.

3. Rent-To-Own vs. Paying Cash

Where do you go when you have an appliance crash or the kids break the television, do you go to the big box or department store to purchase the item or are you on first-name basis with your local rent-to-own shop? When you lack the ability to pay cash for the things that you need, then this is a huge sign that you do not have the necessary savings in place for your emergency fund.

Experts suggest that every family has enough money stashed away to cover three months of expenses. If you lose your job or become injured and cannot work, you need this financial cushion to help you over the hump. If you do not have this and something unexpected happens, you will go broke within weeks.

2. Low Credit Score

Credit scores are much more important than many people think. Most people assume that a credit score simply affects how you are able to purchase things like cars and houses, but most people do not see that it also affects what you pay for deposits, where you can get a job and what your insurance premium will be. Some people have a low credit score simply because they are young and inexperienced with their credit, but when you have a low score due to not paying bills on time or having accounts in collection, this is a sign that you need to have a good look at what you are paying and what you are not paying.

1. The Inability to Cover Bills

When you find it hard, if not impossible, to pay your bills on time every month, then you need to take a good look at where your money is going. You will want to look at what you spend every month on loan payments, bills, food and even entertainment. When you know where your money is going, you can build your budget so you can cover your required monthly expenses. Once your expenses are covered then you can tailor the rest of your budget for what you need and eliminate what you can live without.

When you need a financial overhaul, the prime place to start is with your auto insurance. Many drivers carry insurance that they simply do not need, or they have too much that they don’t need to pay for. Little things like raising your deductible and lowering your liability will help you to minimize your monthly expenses. Look at http://www.budgetsaresexy.com/2013/02/15-signs-youre-in-financial-trouble/ for more money saving ideas.

 Author Bio:

Kevin Beene has worked as a personal finance consultant for 20 years. He shares his tips and knowledge on a variety of blogs online. Visit the website to learn how to save on car insurance rates.

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