13 signs that your personal finances are under stress and what to do about it

A debt crisis never comes out of the blue. Just as seeing black clouds on the horizon gives you plenty of warning that a storm is coming, there are several signs and signals that your finances are under stress. However, ignoring your credit problem until it becomes overwhelming is something that many people do when faced with money worries.

The trick is in spotting these signs and – most importantly – doing something about your escalating cash crisis before things get even worse.

To help you spot the signs that your financial problems are getting out of control, we’ve put together 13 signs that show your personal finances are under too much stress. In addition, we’ve included a few ideas about how you can help yourself out of a downward debt spiral.

If you can’t afford to put even a little money aside for a rainy day then this can be a key indicator that your finances are on a knife-edge. This is also the case if you do put money aside but are forced to use it all before the next payday comes along.

If an ‘unexpected expense’ seems to crop up every month to wipe out your well-intentioned savings pot, this may be a sign that your savings pot is too small.

Read more about how to start an emergency savings fund.

While we all look forward to payday, struggling to reach this milestone every month indicates that your finances may be stretched too thin. Similarly, having to ask your boss for an advance or, worse yet, using a payday loan provider or taking out cash on a credit card, is a sure way to make sure that the situation will only continue to get worse. While short-term borrowing may seem like a good idea, it will leave you with even less to live on after the next payday and will likely incur extra expense in interest charges – starting the whole cycle again.

Used properly, credit cards can be a handy way to deal with a temporary cashflow problem or a genuinely unexpected expense. Credit cards are best used when the outstanding balance is paid off every month, as this avoids you paying any interest costs. However, if you already have a credit card debt incurring interest, then a 0% balance transfer credit card can provide you with a set number of interest-free months to pay off your old credit card balance. However, there will normally be a transfer fee to consider and if you continue to spend and don’t clear the debt, it is only a temporary reprieve. Read more about minimum credit card repayments or use our minimum repayment calculator.

If you are only ever able to pay off the minimum payment on your credit cards and/or have missed payments over an 18-month period, there is the potential you are in persistent debt. This means that the payments you are making are paying your fees and interest charges rather than clearing your actual original balance. Your card provider should contact you if you are in this situation, and the best way to address this is to increase your monthly repayment. If you cannot increase your monthly payment you could consider getting some free debt advice.

If you are spending more on your credit cards each month than you are clearing your debt with the minimum payment, then alarm bells should be ringing.

Read our guide free yourself from credit card debt.

Ignoring any kind of debt will not make it go away. If you find that you are missing payments for any kind of credit agreement, then this is a financial warning sign that can’t be ignored. If you continue to miss payments your lender can take action against you, such as demanding full repayment immediately or adding on extra charges for admin and late payment costs. In a worst-case scenario, you can find yourself in court for non-payment of debts, with your credit score taking a nosedive and effectively barring you from using credit for a significant time. For example, a County Court Judgement (CCJ) that is unsettled within the agreed time will stay on your credit file for at least six years.

Read more about how credit scores work.

While on the face of it, occasionally having to buy your weekly grocery shop on a credit card, may seem harmless, it can be the start of a slippery slope. Having to pay for your weekly shop (or petrol) is an indicator that your personal finances and management of your outgoings may be getting out of control.

Of course, some supermarkets offer credit cards through their banking arm and may offer you rewards or points if you pay for your shopping using their credit card. In these circumstances, you should immediately pay off the balance afterwards to avoid costly interest racking up.

Read our guide 12 steps to get debt free for tips on reviewing your spending habits.

Like credit cards, overdrafts are meant to be a short-term stopgap solution to those unexpected expenses that crop up from time to time – not something that becomes a regular feature in your statement. Not clearing your overdraft – or worse yet – not being able to get back into the black even after your wages have been paid, can indicate financial problems.

Read our guide Seven steps to getting and staying overdraft-free.

The cost of utility bills, especially for things like gas or electricity, can fluctuate throughout the year. With its colder temperatures and short days, winter can see your heating and electricity bills rise. So, it’s not unusual to find you may have a small debit in your balance come springtime. However, if you are genuinely struggling to pay for your basic utilities this is a clear sign of financial distress. Similarly, being forced to pay gas, electricity or water bills using a credit card or overdraft is a bad idea if you can’t immediately clear these debts come payday.

Using a cash advance to pay the minimum balance on other credit card is a sure sign that your debt and credit handling is in a bad place. Many credit cards charge high amounts of interest and additional charges for cash advances, meaning that far from escaping a debt, you are only digging yourself further into the hole. Find out more about credit card cash advances in our guide.

Read our guide Free yourself from credit card debt.

Where would some of us be without the bank of Mum and Dad? Where else can you find such reasonable interest-free loans and flexible repayments? Borrowing from your family is something that often happens – and parents are usually only too happy to help young people get a financial leg up in life. However, like any form of credit, this can be open to abuse.

Missing payments or failing to repay a loan from family or friends will have a negative impact on your relationships. Most people like to help but no-one wants to be a ‘soft touch’ when it comes to money. Hence, if you find you are dodging phone calls from family or friends about a debt, take this as a bad sign that your finances are out of control.

Having little or no money left after you’ve paid out for your credit, groceries and household bills is a red flag for anyone’s finances. While we all might have a ‘tight’ month where cash is a little short, if this is happening on a regular basis you would do well to stop and consider what state your finances are in. If you don’t have a clear budget that details what you are paying out and when, you can quickly find yourself on thin ice financially.

Money and mental health are often linked. Poor mental health can make managing money harder and worrying about money can make your mental health worse.

Money worries are one of the most common triggers for people suffering from a range of mental health issues, including anxiety and depression. Feeling you are struggling to cope with debt or being faced with a financial situation that is seemingly hopeless can have a profoundly negative effect on both you and those around you. Relationships with family, friends and co-workers can suffer, leading to even more stress and a downward spiral in your emotions.

If you find that money worries are affecting your health, home life or workplace performance, then it’s time to stop and get help for your problems – especially if they are the root of your financial woes, such as an addiction.

Strange as it may seem, some people’s reaction to out of control debt is to go out and spend even more on the very credit cards that they are struggling to repay. While we might use the term ‘shopaholic’, buying things that you cannot afford is an often-reported symptom of financial stress. By lavishing gifts on yourself or others, you may be trying to cover up feelings of high anxiety or low self-esteem brought on by money worries. Adding to your debt burden is not the way to tackle this issue and, in the long run, will only make matters worse.

MIND is a charity dedicated to providing free advice and support to anyone experiencing a mental health problem. Read MIND’s dedicated page for money and mental health.

Being denied any form of credit is a bad sign that your finances are in trouble. Being refused credit can occur when you make an application for a new credit card, loan, hire purchase agreement, overdraft – even a mobile phone contract – or when you try to increase your credit limit.

Credit refusal is normally the result of an automated credit check or a decision taken by the lender based on your previous financial history. Things such as missing credit payments, defaulting on a loan, having a CCJ made against you for debt, being declared bankrupt or the subject on an individual voluntary arrangement (IVA).

For some people, the penny doesn’t drop that they are in financial trouble until the issue becomes ‘real’ – usually in the form of creditors or debt collecting agencies knocking on your door. If the situation has reached a point, whereby your home or family belongings are under threat of repossession or your salary is being ‘garnished’ (a term used when a court orders that a proportion of your salary is deducted from your wages each month to pay back outstanding debts), then there is no clearer sign that you are in deep financial distress.

Like so many things, the first step to sorting your finances (and dealing with your debts) is to admit there is a problem. If you’ve concluded that you need to start tackling your money issues, then we have a few tips to help you get your finances back on track. In addition, we’ve included some extra resources that you can read and places you can go for help below.

It might sound like an obvious first step, but you’d be surprised just how many people don’t fully know what is coming out of their bank account and when.

Don’t worry, you don’t need to be a whiz on MS Excel or have a degree in accounting to put together a simple budget. Start by listing all the things you need to pay for every month – this includes things such as your mortgage payment or rent, cost of utilities such as gas or electricity, as well as groceries. Don’t forget to include any credit card or loan payments as well as other standing order and direct debits.

In fact, there are a number of great smartphone apps that can help you manage your budget. 

Above all, be realistic and honest about everything you owe and your outgoings.

Once you have a list of all your outgoings you can see how things stack up against your wages. Do you have enough to cover all your expenditures with cash left to spare for the unexpected or are you spending more than you earn?

See where you can make some savings or cancel services that you may not be using, such as streaming TV services or gym memberships.

Finally, once you’ve set your budget, make sure you stick to it. Tracking your progress from month to month can help tremendously with maintaining your motivation.

Having a fund of cash put aside to deal with those unexpected expenses is a great insurance policy against having to use credit cards and overdrafts that charge fees and interest. Speaking of interest, you don’t have to lock your cash away to get a decent return – there are plenty of easy access savings accounts that will give you a modest return and the ability to get to your money when you want. Imagine getting interest on your money instead of having to pay it out to lenders! There are also apps available which help you automatically save, find out more about savings apps here.

If you prefer the discipline of putting money aside regularly, try a regular savings account which will net you more interest.

If you’re trying to scale a debt mountain, it makes a lot of sense to make sure that you are paying as little interest as possible. Why not consider transferring your debts to a specialist 0% balance transfer credit card? These offer zero interest on balances transfers for several months (normally 24 months or more), which means you can pay off more of your debt rather than just paying off mostly interest.

The same goes for loans. Look into the possibility of consolidating several loans using a single loan but with a lower interest rate, if you can. Our personal loan comparison tables will give you an idea of what’s available in the market right now.

Alternatively, you can check your eligibility for a pre-approved loan with multiple lenders in just minutes – all without affecting your credit score – through our broker, Loans Warehouse.

However, those in financial difficulty may find it hard to get accepted for the best credit deals. So always ensure that you pay careful attention to the interest rate you will be charged – especially how it compares to the rate you are paying for your debts at present

Of course, there are situations where you may have no choice but to buy or pay for something using a credit card. However, be smarter about how you use it by choosing a 0% purchase credit card, which offers you a longer interest-free period to repay a debt over.

A good rule of thumb to keep your credit card spending under control is that you can only use it to pay for items that you can pay off completely in three months or less.

Resisting the urge to spend on a credit card can be hard and requires willpower. Make sure that you can’t give in to any sudden spending urges by destroying your cards – simply cutting them up is a simple answer.

In addition, remove your credit cards from all your online shopping outlets so you can’t cheat and still use them after you’ve destroyed your cards.

Nowadays, most repayments can be made quickly and simply from your bank account – but what happens if you’re prone to forgetting when a bill needs to be paid? Easy – consider moving your payments onto direct debits or standing orders. These will automatically come out of your account and mean you’ll never miss a payment again.

Just a word of warning: it’s best to have all your direct debits and standing orders set for payment as soon as possible after payday – that way you minimise the risk of not having enough money in your account. It also means that you’ll know exactly how much money you have left to last until your next payday.

Some financial issues can be solved with the help and advice of family and friends – especially if you are motivated to change and ready to limit your spending. Don’t be afraid to ask for help (meaning advice and guidance from parents, siblings or mates – not a handout or borrowing even more money!). You’ll be surprised how many people have been in a similar situation and can pass on a few money-saving tips!

However, some financial problems can be too big, or you just can’t see a way through them. In this case, you could try the following organisations – all which offer specialist help and advice for dealing with debts – often this is totally free.

• Citizens Advice – Visit its website or pop into your local CAB centre.
• The Money Advice Service – Free and impartial advice from an official Government website.
• The Samaritans – For anyone in crisis. Available 24 hours a day, 365 days of the year.