The Lifecycle Of A Financial Crisis.....
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    • The Lifecycle Of A Financial Crisis.....

    Manish Singh

    icicipru,sr sales manager, insurance,finance
    The Life cycle Of A Financial Crisis
     Are you heading for trouble with credit card debt and other kinds of debt? No one ever intends to become bankrupt, but over one and a half million Americans file for bankruptcy every year. If you are experiencing a few financial problems today, you could be in the early stages of a financial crisis. While every situation is different, the financial crises that strike most people follow a recognizable pattern. The purpose of this article is to illustrate the lifecycle of a financial crisis so you can recognize if you are heading for trouble.


    The Early Stages
    Five signs that you may be in the early stages of a crisis.

  • You count the days until your next paycheck, worried that some checks might not clear
  • You have started to pay for groceries and other frequent purchases with a credit card
  • You take out a new credit card because it seems like a good deal and you could use the money
  • You are becoming uncomfortable talking about finances with your spouse or family members
  • You formerly paid off your credit card every month, but now you're carrying a balance from month to month
    • If you can relate to any of these warning signs, you may be in the early stages of a financial crisis. You still have time to make changes and avoid major problems, but you need to act now.

    Even if it makes you uncomfortable, talk honestly with your family about finances. If you aren't happy with your current situation, decide on a few positive steps your family can take. Everyone except young children should make some sacrifices and play a role in decisions that are made.

    Action Steps for the Early Stages
    Step 1 Pay off the balance on one of your credit cards and cut up the card.

    Step 2 Eliminate one or two regular costs that are nice, but not necessary. That might be gourmet coffee, expensive meals in restaurants, new clothing or just about anything else that is nonessential.

    Step 3 Write checks or use a debit card for most routine payments such as the grocery store. The money you spend will seem more real if it comes out of your account a few days later.

    Step 4 Set up a special account at your bank or credit union where you will save money. Have a certain amount automatically transferred each month from checking into that account. You won't have to think about it and you won't miss the money. It will be allowed to gradually accumulate.

    The Middle Stages
    Five signs that you may be in the middle stages of a crisis.
  • You are hiding purchases from your spouse or family members
  • You decide to pay some bills and not pay others each month
  • You have regular arguments with your family about money
  • You receive one collections phone call or letter from a creditor
  • You use one credit card to pay off another card
    • If any of these signs sound familiar, you have two choices: you can take action right now or you can try to forget about it and face a possible full-blown financial crisis.

    Action Steps for the Middle Stages
    Step 1 Form a plan with your family for paying off debt and reducing spending.

    Step 2 If you are unable to make a payment, call the creditor and explain the situation. Unless it's a regular occurrence, most creditors will be reasonable.

    Step 3 Don't put your credit card statements away. Post them on a bulletin board to motivate yourself.

    Step 4 Pay off the credit card balance with the highest interest rate.

    Step 5 Talk to a credit counseling agency. A counselor will listen carefully and suggest solutions that might work for your situation.

    The Late Stages
    Five signs that you may be in the late stages of a crisis.
  • You don't answer the phone because you are receiving so many collection calls and you also dread the arrival of the day's mail
  • You take a cash advance on a credit card to pay another card
  • You have maxed out several of your credit cards
  • Money is causing problems with your spouse or family members
  • You are having trouble sleeping at night because of your financial problems
    • It's likely that you are in the late stages of a financial crisis and major actions are required to change your life. The stress of a financial crisis can lead to increased instances of marital problems, divorce and health problems related to stress.

    It is strongly recommended that you talk to a credit counseling agency about a plan for getting back on your feet. The counselor may recommend a debt management plan that would allow you to make a single monthly payment. The agency would then make payments and handle all communications with your creditors.

    In the most serious cases, bankruptcy may become necessary. However, most people can avoid bankruptcy and successfully rebuild their lives.

    Action Steps for the Late Stages
    Step 1 Call a credit counseling agency and talk to a counselor.

    Step 2 Work with a credit counselor on a plan to gradually fix your problems.

    Step 3 Cut up your credit cards.

    Step 4 Talk to your family about exactly what is happening.

    Step 5 Remember that it will take time to fix your problems (most people can eventually pay off their debts in 3-5 years).

    Financial problems usually start slowly, caused by too much spending and too little saving. Unchecked, these problems can gradually turn into a financial crisis. If you recognize any of the warning signs listed in this article, you should take immediate steps to change your behavior and fix the problems.

    You can break the pattern of a financial crisis, but you need to be willing to admit the problem and take action today.

    thanks n regards
    MANISH SINGH
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