10 Warning Signs of Financial Trouble
- UpdatedOct 31, 2024
- There are clear warning signs before serious financial trouble.
- Warning signs show that you're spending more than you earn. Every single month.
- Debt relief can get you out of unaffordable debt and help you start over.
Table of Contents
- 1. You are only paying the minimum amount, or less
- 2. You shuffle debt around from credit cards to credit cards
- 3. You are near the limit on each of your credit cards
- 4. You charge more each month than you make in payments
- 5. You’ve received phone calls or letters about delinquent bills
- 6. You use credit cards because you don’t have money
- 7. You are dipping into your savings to pay your monthly bills
- 8. You are embarrassed about your debt and afraid to let people know about it
- 9. You sign up for every credit card that sends you an offer
- 10. You worry constantly about your next paycheck or income source
- Learn how to get out of financial trouble
One of the biggest hurdles people face before deciding to do something about their debt is acknowledging that there is even a problem. Denial is a strong force, one that can hinder you in making improvements to your financial situation. And if a family member or close friend is showing signs of debt trouble, it may be difficult to break through that denial and help them own up to it.
If you are wondering if your finances (or those of someone you care about) could be in better shape, here are 10 warning signs of financial trouble.
1. You are only paying the minimum amount, or less
You are not doing yourself any financial favors when you only make minimum payments. You generally end up paying far more in fees and interest than the item you purchased originally cost. If you can afford to pay more, do it.
2. You shuffle debt around from credit cards to credit cards
One of the most telling warning signs of financial trouble is the practice of moving money around from card to card. You’re not really paying off anything when you use other credit cards to make the payments (although balance transfer cards, if used properly, can help you reduce your debt). Debt shuffling does not equal debt repayment.
3. You are near the limit on each of your credit cards
When you have high credit card balances relative to your credit limit, it decreases your purchasing power and lowers your credit score. This metric, referred to as your “balance-to-limit ratio,” should be kept as low as possible.
4. You charge more each month than you make in payments
Charging more on your card than you make in payments each month is one of the most obvious warning signs of financial trouble, since it puts your financial situation on the wrong trajectory. It’s important to create a budget and aim to make payments on time and in full.
5. You’ve received phone calls or letters about delinquent bills
Are you constantly worried about getting calls from your creditors? This is a more urgent warning sign of financial trouble. If you’ve reached this point, it’s time to deal with the situation by resolving your debts and cleaning up your financial house.
6. You use credit cards because you don’t have money
In hard times, it is nearly impossible to avoid using your cards as a cushion. At the end of the day though, consider whether you can spend less or find additional income, because this is not a healthy path to be on for the long term.
7. You are dipping into your savings to pay your monthly bills
Any reputable financial advisor will tell you how important it is to have an emergency fund. If you are having trouble making payments and dipping into your savings, this is a sign that you are struggling financially.
8. You are embarrassed about your debt and afraid to let people know about it
Struggling with debt isn’t uncommon, but many debtors are ashamed of their situation. Debt is nothing to be ashamed of and the earlier it is addressed, the easier it is to recover.
9. You sign up for every credit card that sends you an offer
Every time you sign up for a new card, your credit gets pulled. If you are maxed out on your current cards, rushing to get a new one is a clear warning sign of financial trouble.
10. You worry constantly about your next paycheck or income source
Are you always impatient for payday? It’s so stressful to live paycheck to paycheck, and it shouldn’t have to be that way. Perhaps it’s time to review your spending and savings habits, and develop a plan to make better financial choices.
Learn how to get out of financial trouble
If you’re struggling with debt, worried about falling behind on payments, or noticing any of the other warning signs of financial trouble, it might be time to the next step. Freedom Debt Relief can help you make a plan for the better, which includes our debt relief program. Our Certified Debt Consultants can help you determine how to chart a better financial future and help you discover your options for managing debt. Find out if you qualify right now.
Learn More
How to Get Out of Credit Card Debt (Freedom Debt Relief)
How Much Debt Is Too Much Debt? (Freedom Debt Relief)
How Do I Talk to Someone I Want to Help Get Out of Debt? (Freedom Debt Relief)
Debt relief stats and trends
We looked at a sample of data from Freedom Debt Relief of people seeking debt relief during September 2024. The data uncovers various trends and statistics about people seeking debt help.
Debt relief seekers: A quick look at credit cards and FICO scores
Credit card usage varies significantly across different age groups, reflecting diverse financial needs and habits.
In September 2024, the average FICO score for people seeking debt relief programs was 577.
Here's a snapshot by age group among debt relief seekers:
| Age group | Average FICO 9 credit score | Average Credit Utilization |
|---|---|---|
| 18-25 | 566 | 90% |
| 26-35 | 572 | 84% |
| 35-50 | 572 | 84% |
| 51-65 | 579 | 82% |
| Over 65 | 595 | 81% |
| All | 577 | 83% |
Use this data to evaluate your own credit habits, set financial goals, and ensure a balanced approach to managing credit throughout your life.
Collection accounts balances – average debt by selected states.
Collection debt is one example of consumers struggling to pay their bills. According to 2023, data from the Urban Institute, 26% of people had a debt in collection.
In September 2024, 30% of debt relief seekers had a collection balance. The average amount of open collection account debt was $3,203.
Here is a quick look at the top five states by average collection debt balance.
| State | % with collection balance | Avg. collection balance |
|---|---|---|
| District of Columbia | 23 | $4,899 |
| Montana | 24 | $4,481 |
| Kansas | 32 | $4,468 |
| Nevada | 32 | $4,328 |
| Idaho | 27 | $4,305 |
The statistics are based on all debt relief seekers with a collection account balance over $0.
If you’re facing similar challenges, remember you’re not alone. Seeking help is a good first step to managing your debt.
Manage Your Finances Better
Understanding your debt situation is crucial. It could be high credit use, many tradelines, or a low FICO score. The right debt relief can help you manage your money. Begin your journey to financial stability by taking the first step.
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