Regardless of how much money you have in the bank, you are always at risk of a financial crisis if you have high debt obligations.
Unfortunately, it’s easy to slip into a cycle of debt and when people are able to make their minimum payments, they often assume that their finances are stable.
However, that is not the case because any small changes to your income or any unexpected bills could land you in a lot of trouble.
So, are you having a personal financial crisis?
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What Constitutes A Debt Problem?
Having debts does not automatically mean that you are having a personal financial crisis, so what constitutes a debt problem?
If you don’t have enough money to meet your debt obligations every month, then that’s a clear sign that you have a debt problem, but there are other signs to look out for as well.
If you often borrow money from friends and family to cover debts or living expenses, that is a bad sign as well because it shows that you cannot comfortably cover all of your financial obligations.
Many people also use a line of credit to pay off credit card debt, and if you are moving debt around like this, that’s another sign that you are having a personal financial crisis.
Even if you are able to pay all of your bills and debts every month, you may be on the verge of a personal financial crisis if you do not have any surplus income to put into savings after meeting your financial obligations.
The most common signs of a personal financial crisis include:
- Being unable to comfortably pay bills on your current income.
- Being unable to save after paying your bills.
- Debt levels increase every month.
Increasing debt levels is the biggest thing to watch out for because if you don’t find a way to get on top of your debts, your finances will soon spiral out of control.
Avoiding A Personal Financial Crisis
If you are only just able to pay your bills and your minimum debt payments, your finances are on a knife edge.
A sudden job loss or an unexpected bill can lead to a financial crisis overnight, and people often find themselves in this situation because they are living beyond their means.
If you want to avoid a personal financial crisis, you need to start living below your means.
This allows you to build up some savings and put more money towards debt payments, so you can regain control of your finances.
In some cases, finding ways to cut back on your expenses may be enough to avoid a financial crisis, but it may already be too late.
How To Recover From A Personal Financial Crisis
If your debts are too high and there is no way that you can pay back what you owe, even if you make some big changes to your budget, you need to start looking into your other options.
Debt relief options, like bankruptcy or consumer proposals, may be your only way out of debt, but it’s important that you understand the process and the after effects of debt relief.
Our expert team can advise you on different debt relief options and help you to find your way out of debt, so get in touch today.
You can reach us on the phone or fill out an evaluation form and we will get back to you.
Information on Consumer Proposals
Consumer Proposals in Canada – An Alternative to Bankruptcy
What is a Consumer Proposal?
How to Amend a Consumer Proposal
What are the Benefits of a Consumer Proposal?
What are the Steps in a Proposal?
Consumer Proposal Eligibility
What Debts Are Erased in a Consumer Proposal?
Is There Life After a Proposal?
How to File for Bankruptcy
What is Bankruptcy?
How Does Bankruptcy Work?
What is the Cost of Bankruptcy in Canada?
How to Rebuild Credit Following Bankruptcy
Personal Bankruptcy in Canada
What Debts are Erased in Bankruptcy?