Financial mess can cause you to fall into a debt trap

Many of us will suffer a financial mess at one stage or another in our lives. Whether it’s overuse of credit, too many bills arriving at once, ill-health, losing a job, or an unusual turn of events, the reality is a financial mess can happen to anyone.

By: Hitesh Khan/

Research into the financial habits of adults facing financial mess found that a large number of us are struggling to manage our finances:

• one in five, 20% admit to having no particular budgeting strategy;
• one in four, 28%, say they make impulse purchases outside their normal budget;
• one in five, 22%, make a large number of shopping trips that cost more than intended;
• one in eleven, 9%, have no money set aside if several bills were to arrive at once, and would need to strike up a payment plan with one or more of the companies concerned to pay off the debt; and
• one in six, 17%, are forced to spend on unexpected bills during any given month

These sorts of money problems are spread throughout the community. Financial problems are found in all types of households, irrespective of people’s age, sex, marital status, occupation or income. It’s not just a problem for the unemployed.

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A large proportion of us are simply unprepared to handle a financial mess.

Some don’t have the skills to manage their money prudently. Others ignore the warning signs and fall into a debt trap. Whatever the causes, the consequences can be devastating.

If you are in a financial mess, you need practical information to enable you to take control of your finances and be better prepared for the unexpected. You also need information on who you can turn to for help in sorting out your money problems.

As many people say, prevention is better than the cure. If you are already finding it difficult to cope with day to day financial pressures, you should consult a financial counsellor who is trained to help you resolve current money problems and put you back in control of your finances.

10 steps that you can take to avoid falling into a debt trap include:

• Draw up a budget – which has savings goals and spending priorities – and stick to it.
• Have an emergency fund equal to three months income
• Avoid impulse purchases and frequent trips to the shops – put things on lay-by if you must have them
• Use your own money to pay for goods and services as much as possible
• Pay the balance on your credit card balance off each month especially after festive occassions
• If you regularly carry a credit card balance over from one month to the next, make sure the interest rate on the card is reasonable
• Reduce the number of credit cards you have
• If your pay is deposited electronically into your account, ask to pay your loan via GIRO
• If you have several loans including lots of credit card debt, consider consolidating the loan balances into one personal loan – this will give you the opportunity to clear the debt, with one set of repayments, over a fixed period of time.
• If you are experiencing problems, talk to your creditors straight away. You may feel awkward and embarrassed, but it is important to let your creditors know what is happening. Most creditors will be pleased you have called to inform them about the situation. When they haven’t heard from you, they will think the worst. Avoiding creditors only puts them off side. Before you talk to them, sit down and work out what you are going to say. Take the time to think about what money you have coming in and what money you are spending. Prepare a money plan so you can make an offer to your creditors that is realistic and within your means.

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More tips if you are facing financial mess

Don’t make promises you can’t keep. It will make negotiation that much harder in the future. You are not alone. Removing the fear and anxiety of a financial mess should be an important priority for all of us. Unfortunately, crises will happen so it’s best to have a sound budget and savings goals that can cope with life’s emergencies.

If you take a step back and consider all the options available to you, you can take control of your financial mess. Most importantly, don’t let a short-term money problem turn into a long-term nightmare.

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