Are you afraid to open your mail?
Untouched bills and statements may be a sign of trouble ahead. Fixing things -- or preventing further damage -- might be simpler than you think.
After graduating from college in 2001, Andrea Blackwell diligently paid off her credit cards in full every month . . . for a while.
Pretty soon, though, it became easier to pay just the minimum. Then it became easier not to even open her statements.
"I knew approximately what I had to pay (to cover the minimum payment), so I would send that in," recalls Blackwell, who lives in Portland, Ore. "I just didn't want to know how much I owed."
Those unopened bills or bank statements are a powerful warning sign, a not-so-subtle hint that you're headed for trouble, even if you're not officially there yet.
Here's the thing, though: Financial problems almost never get better if you ignore them. They tend to fester and multiply in the dark, even if the news is bad when you turn on the lights.
The cost of refusing to look
Blackwell later began skipping payments, at one point leaving her account 90 days overdue.
Blackwell's refusal to confront her debt cost her dearly. Her credit was trashed. Late payment fees, credit insurance and continuing purchases swelled her balance until it was over the limit and the credit card issuer shut down the account.
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Blackwell's financial denial ended after about two years. She was engaged to be married and didn't want her credit troubles to hurt her and her fiancé's chances of buying a home.
She worked out a payment plan, got a secured credit card and eventually started blogging about her journey from frivolousness to frugality at Modern Tightwad.
When she recently came across some of the unopened bills from that period, she started to cry. Every $40 late and over-limit fee felt like an indictment.
"It's almost as if I didn't care enough about myself" to deal with the situation, Blackwell said. "Once I started feeling responsible for someone other than myself, then I did something about it."
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Six signs of trouble
Few of us want to pore over the details of our finances 24/7. And not opening your retirement statements after a bad quarter may be simple self-preservation.
But if you find yourself constantly avoiding money details, you could be setting yourself up for financial ruin.
Here are six warning signs that you're headed for trouble:
* You don't open bills shortly after they arrive.
* You ignore e-mail or text alerts from your bank or credit card companies.
* You have no idea how much money you owe.
* You're often surprised -- and not pleasantly -- by the balance in your bank account.
* You've paid more than one late or bounced-cheque fee in the past year.
* You've skipped a payment because you "forgot" about the bill.
Actor and comedian David Beach of Pasadena, Calif., said his financial denial is situational. When the money is flowing in, as it was this summer, he pays attention to his bills and bank balances.
"But I'm back to hand-to-mouth living soon," Beach said. "I go through phases of 'scared to look.'"
You may feel that tending to your money is pointless because you can't improve your financial situation right now. But you can usually keep it from getting worse.
A single lapse of attention can lead to hundreds of dollars in bounced-transaction fees. Late or skipped bill payments can trash your credit scores, which can cause your interest rates to soar, jack up your insurance premiums and make it harder to get an apartment or a job. Skipping a car payment can lead to repossession, while missing three or more mortgage payments can start the expensive process of foreclosure.
In other words, fixing your finances will be a lot more expensive and take a lot longer than if you'd shaken off your denial in the first place.
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What to do when you finally look
Blackwell now knows she could have done a lot to help herself if she'd grabbed the reins earlier. After she decided to take action, she scoured the Internet and a stack of personal finance magazines given to her by an uncle. Then she:
* Set up automatic payments so her minimum balance was taken from her bank account every month, preventing late fees.
* Used online account access so she could track her balance and know when she was getting close to her credit limit (e-mail or text alerts can also help).
* Used low-rate balance transfers to move her debt to a less-expensive card.
"I had the resources (to improve the situation)," Blackwell said. "I just didn't know it."
Even if you truly can't pay your bills, you still have better options than ignoring your money:
* People who can't afford their mortgages may have options, including refinancing or loan modifications.
* Credit card lenders and other creditors are typically more willing to work out repayment plans these days, as unemployment rises and collections slow. But you have to call and ask.
* If you can't get anywhere with your creditors on your own, you can consider credit counselling, debt settlement or even bankruptcy.
Bankruptcy attorneys and trustees will tell you many people wait too long to file, throwing good money after bad as they struggle with debts they simply cannot pay. Having a third party scrutinize your situation and tell you about your options could help you cut short your agony and get a fresh start.
Then again, bankruptcy isn't always the best solution. If your financial crisis is short-lived, you may simply need to know the best way to ride out the storm.
It can also help to realize others have been in the same boat, and navigated a way to shore. Maybe you can find hope and inspiration on our message boards?
What's essential is that you bust through your fear, shake off your inertia and take action. Open those bills, check those bank balances and formulate a plan. The longer you delay, the bigger the mess you'll have to clean up. Do your future self a favour, and start now.
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