Only Making Minimum Credit Card Payments: 2nd Warning Sign
Making only minimum credit card payments is a trap that many Canadians unfortunately fall into After all, you’re still making the monthly payments that your creditors require, and you might still have a good credit score. However, behind this illusion of stability is an ever-widening chasm of progressive risk.
Why are minimum payments a problem? Making only minimum payments means you’re just keeping up but not getting ahead or paying the debt down in any significant way. The interest you pay eats into the money you have to spend, which might then cause you to use more credit to make up for it. This new credit will have its own interest, continuing the cycle. Before you know it, your balance might become so high that you can no longer afford even the minimum payments, and those are just the tip of the debt iceberg. This is a red flag showing you need help as soon as possible, especially if you’re using other forms of credit – like a high-interest payday loan, or cash advance – to pay off debt you already have.
So what can you do instead of making only minimum payments? It’s crucial to bring your spending down. If you’re getting close to this debt cliff, get help right away. You’ll have more debt relief options if you do, plus you’ll sleep better knowing you’ve got a plan.
Not Using a Budget: 3rd Warning Sign
Those who don’t plan what to do with their pay cheques often simply aren’t sure how to budget money. Does this sound like you too? It’s true that some people do just fine without ever thinking about budgeting. Others manage with an alternative way of budgeting where they just keep a list of what they’re spending versus keeping track of their bank account by memory. However, most people who have debt problems can see a real and immediate improvement to their financial situation as soon as they make and follow a budget.
Why is not using a budget a problem? Many people feel overwhelmed at the thought of creating and then following a budget. They don’t like having to keep track of what they’re spending. This can feel stressful, but ignoring expenses won’t make them go away. It will just make it harder to get your finances back on track.
All a budget really does is help you stick to the choices you make ahead of time for how you want to use your money. In the end, having a plan and following through with it will do more for you than any financial program out there. The best debt help organizations will also provide budgeting help. If you need that extra push and expertise to make a budget that works for you, then we’re happy to help you with that.
Interactive Budgeting Guide