10 signs you're in financial danger

Following the recent economic downturn, how do you know whether your finances are in danger? Would better information help? If so, here's 10 signs of the potential danger and how to avoid them!

How much have you been affected by the economic downturn? If you or your partner have lost your jobs or had to take a pay cut or a pay freeze, you’re no doubt feeling the pinch.

But are you coping? Have your costs, such as your mortgage payments, fallen as well? Have you got savings to fall back on? Or are you among the ‘most at risk’ – those hardest hit by the downturn who are starting to do things that will put them in serious financial difficulty in the future?

Here are 10 signs you’re putting yourself in financial danger:

1) You're only paying the minimum monthly repayment on your credit cards

Minimum monthly repayments are typically set at ridiculously low levels. This means that if you're only managing to pay this amount, it's going to take you a long time to pay off your credit card debt in full. Not only that, but you'll end up paying far more in interest before you clear your balance.

2) You don't know how much you owe and you don't want to find out

If you've lost track of how much you owe and have no idea how you ended up in debt, you're probably overspending. Losing track of what you're spending where is not a good idea, especially if you're spending large amounts. It indicates you've really got no control over your finances.

3) You're borrowing more to pay off your debts

Borrowing more and getting further into debt to meet your other debt payments is a dangerous path to follow - particularly if you're using payday loans, logbook loans or credit card cheques.

Equally, if you're taking money out on your credit card just to cover monthly payments on other debts, you could find yourself in serious trouble in the future. Find out more in Six dangerous ways to borrow.

4) You're spending more than you earn

If you have no idea what your budget is and you're spending more than you earn each month, or you're not sure whether your salary is covering your expenses, you could be in serious trouble.

5) You use your credit card to pay for everyday spending

If you regularly use your credit card to pay for necessities such as food or petrol and can't afford to clear the balance each month, your debts will continue to build up and put more strain on your finances.  

6) You're regularly late paying bills

If you regularly fail to make your bill payments on time, your cheques bounce, or you overspend on your credit card or overdraft, you'll incur extra fees and charges from your bank. This will drive you further into debt and could also damage your credit rating.

7) You don't have any savings

If you're unable to put even a little money aside into a savings account each month because your debts are too high, that's not a good sign. Having said that, it is usually wise to pay off your debts before starting to save - so it's the right strategy, but don't be blase about it: it's a sign that you are struggling.

8) You find it hard to talk about your situation

If you find it difficult to be honest with your friends and family about your debt problems, or you're lying to them about your spending habits, you could be in denial about your debt.

9) You've been rejected for credit

This could be because you've already got too many credit cards - even if you no longer use them - or because you've missed payments in the past.  All of this can damage your credit rating. Find out more in What REALLY damages your credit rating.

10) You're constantly worried about your finances

Research from talkaboutdebt.co.uk has revealed that 61% of people in serious debt aren't sleeping due to debt stress, and 29% have taken up to six months off work. If your money problems are affecting your working life, leisure time, and how you sleep, it's time to seek help.

Help yourself

If any of the situations outlined above apply to you, you're probably feeling concerned. Debt can have a serious impact on your life, but the important thing to remember is that you don't have to deal with it on your own.

Simply talking about your financial problems with your friends and family can feel like a huge weight has been lifted off your shoulders. What's more, it's a big step in helping you to face up to your debt problem.

And don't forget that lovemoney.com can also help. Why not have a wander over to Q&A where you can ask other lovemoney.com members for advice? Many have been through similar situations and can share tips from their own experiences on how best to tackle a specific problem you raise.

Seek advice

If you're still feeling completely at a loss as to how you're going to tackle your debts, contact a free independent debt advisory service such as Citizens Advice, National Debtline, the Consumer Credit Counselling Service, Payplan, Christians Against Poverty and Advice UK. You can read more about all of these in Get out of debt with free advice.

These charities will be able to provide guidance on a range of options to help you sort out your debt problems, and you won't have to pay anything for this advice.

But whatever you do, don't bury your head in the sand and think your debt problem will go away by itself. Because it won't. There are people out there who can help you and the sooner you start to face your debts, the easier it will be to get yourself out of debt. So don't give up hope!

More: Where to get free debt services | I'm a celebrity bankrupt

If you're confused about the jargon and myths surrounding credit and finance, there's more help available from Capital One at http://www.capitalone.co.uk/creditmadeclearer.