Expert advice

Jul 08, 2015,10.30 IST

Five signs that tell you are financially stretched

Nitin Vyakaranam
ArthaYantra.com

Let us admit it. We all have been financially stretched at some point in life. For some of us it is a temporary phase while for others it is a regular feature of our life. Being short of money can be very disturbing and has an impact on the psyche of a person. Let us analyze what are some of the ominous signs that indicate that we are financially stretched:

• Find it difficult to stick to a budget

Keeping a budget helps in managing our finances. Making a budget for ourselves and for the family helps not only in keeping a check on our expenses but also reduces the risk of over-spending. In spite of the benefits of having a budget, sometimes we find it extremely difficult to stick to the budget. The reasons for not being able to stick to a set budget can be any unplanned expense(s) which keep popping up every month. Not being able to stick to a budget is a dangerous sign that we are off-track in our financial life.

• Meet your Committed expenses with credit

Committed expenses such as rent, EMIs, utility bills, are a regular feature of our monthly budget. These are unavoidable and occur in every person’s financial life. But if you are paying your committed expenses on credit, either with a credit card or through a hand loan, it is a sure shot indicator that you are stretched financially.

• Borrow cash from credit card

In every person’s life, there comes a time when we have to borrow either from a friend, relative as a hand loan or from an institution as a personal loan. Typically these are situations that need cash flows which are beyond our savings at that point in time. When we borrow in this fashion we often have a time frame that we keep in mind and settle the debt. But when we are forced to borrow cash from our credit card, it is a sure shot indicator that we are living much beyond our means and a telltale sign that we are financially stretched.

• Go on a hibernation mode in the last week of the month

Hibernation is a state of very minimal activity to conserve energy. Many of us go through a self-imposed financial hibernation mode during the last week of the month. This can be due to various reasons like not being able to keep a check on the out-flow of cash, impulsive and unscheduled shopping, etc. But if you are going on a hibernation mode during the last week of the month for more than a month, it is an indicator that all is not well financially with you.

• Spend more from your credit card than pay off

We all love shopping, don’t we? Especially, if we don’t need to pay immediately. Yes, that is the option that a credit card gives you. But a dangerous trend is when we keep borrowing from our credit card and only pay the minimum amount due every month. It can be dangerous because the debt from the credit card keeps getting incremental in nature due to the exorbitant interest rates that we agree to while taking the credit cards. If you are paying lesser than what you are spending on your credit card, it is an indicator that you are stretched financially.

Conclusion

We all go through phases in life when we are stretched financially. But it would be prudent to keep an eye open for these signs so that corrective measures can be taken in time.

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