Poor Money Management and Debt

There are several reasons that crop up when the question of 'why am I in debt?' arises - unemployment, business failure, illness, divorce. the list goes on. But the overriding cause behind these reasons can often be attributed to poor money management skills. According to a study by Bankrate, Inc. in February 2008, 60% of Americans say debt is usually the result of bad decisions. In fact, 91% believe that debt can be controlled by disciplined saving and spending [Source:www.hoffmanbrinker.com].

Personal money management is therefore the real issue at hand. It doesn't take long for debts to turn into bad debts and begin to take over your life. For some people, money management is an impossible task, while others might not see the warning signs of an impending financial crisis. Find out if you are one of these people:

• Do you have poor spending habits?
  It is easy to spend more than necessary and lose track of all your expenses. Being aware of where your money is going can help keep your debt burden in check.
• Do you lack communication with family members?
  While you might be struggling to live within your means month after month, your family members may not act the same way (or vice versa). To work towards any financial goal requires co-operation and honesty within the family.
• Do you have any savings?
  Saving even a small amount each month adds up in the long run. This account can then help you when faced with a pay cut, a lay off, or other unexpected costs
• Do you spend money before you have it?
  While you can dream about spending that annual bonus, anticipated inheritance or generous birthday gift, nothing in life is certain. Never spend any money that you do not have currently. It is a recipe for financial trouble.
• Do you live outside your means?
  By month end, if you are faced with no savings and a growing list of debts, then chances are that you are living beyond your means. Be aware of exactly how much income you have versus how much you spend every month
• Do you actually understand how your money functions?
  Being uneducated about finances, can be the critical factor in poor money management. You can avoid a bad financial situation if you understand how money can work for you, how it grows and how you can use credit to your advantage.
• Do you overuse your credit cards?
  Poor financial planning also involves using credit cards to pay for items that you cannot afford otherwise. Once you fall into the trap of using credit to feed your spending habits, debts can add up almost overnight. If you reach the stage of being unable to make your monthly minimum payments, you may face higher interest rates and late charges, making it even more difficult to manage your debt.
• Do you miss the warning signs?
  When faced with debt, the last thing you should do is ignore the signs that indicate a worsening debt situation. Late payments, paying only minimum payments, no payments, increase in interest rates, penalties and high fees, reduction in your credit score and negative comments on your credit report are telltale signs that you are heading into a debt crisis

If any or all of this sounds familiar, please contact us on our toll free number or register online. Remember, learning from mistakes can often be the most positive outcome of any failure. You can avoid making financial mistakes and getting deeper and deeper into debt by first learning what not to do. At CESI, we are here to show you how.