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How to recognize and avoid a personal financial disaster


Katie Ross 
Community Education and Marketing Manager
American Consumer Credit Counseling


While the overall financial situation has recently improved in the United States, many Americans are still facing tough personal financial circumstances. It is important to be able to recognize the signs leading up to a personal financial disaster so you can take the necessary steps to avoid a financial catastrophe and get back on track before it’s too late. 

If consumers who are on the edge of a personal financial crisis can acknowledge that things are bad, they can take the necessary steps to help themselves. The signs that you’re flirting with a financial disaster are pretty clear – you’re continually not paying your bills on time, missing payments, having issues with your credit cards, dipping into savings or retirement, and arguing with your significant other about finances. Fortunately for the consumer, there are several resources to avoid financial distress. 

Do  Woman listening to a piggy bank and thinking about her personal finance

  • pay all your bills on time
  • avoid making payments with credit cards
  • tackle debt with your partner
  • open your bills as they come
  • live within your means 


  • dip into investments or retirement
  • miss payments
  • make payments using credit cards
  • downplay refusal of credit
  • take cash advances on your credit card



Do pay all your bills on time 

Although it may seem like it’s not a big deal, failing to pay your bills on time hints at bigger financial problems. Paying bills late leads to extra charges like late fees, and can deflate your credit score. Also, some student loan lenders and credit companies will increase your interest rate after one late payment. 

Do avoid making payments with credit cards 

When you use your credit card to make payments on other bills, you are playing a high-risk game. You’re not only paying bills with money that you don’t have, you will end up paying more in the end because of the interest you accrue from your credit card company. 

Do tackle debt with your partner 

Money is the number one reason couples fight. Instead of zoning-out when tensions flare, listen to your better half’s position and reflect to determine if what they’re saying is true. Moreover, having an exorbitant amount of debt can definitely add to finance arguments, but if you work together you can devise a plan to tackle the debt. 

Do open your bills as they come 

They say ignorance is bliss, but ignoring bills will only lead to further distress. While opening bills may cause you stress, it’s the only way to get a handle on your finances. Even if you feel like there’s no way you can pay, start looking at your bills and devise a plan on how you’re going to manage your debt and remember that you have options. Try calling the creditor or company to see if you can lower your payment for a short period of time or if it’s a luxury such as a cable bill think about ways you can cut back. 

Do live within your means 

We all know that we should be saving a little each month and there is no way you can save if you are spending more than you earn. Living in the red month after month is very stressful and can lead to major financial problems and even medical conditions.



Do not dip into investments or retirement 

People pull money from their investments and retirement for a number of reasons ranging from medical expenses to mortgage loan distress. This may seem like a good option in the short-term, but the long-term impacts can be devastating because you can deplete your nest egg leaving little to nothing for retirement. 

Do not miss payments 

Missing a payment is a big problem because it will kill your credit score. In fact, most credit card companies and utility companies report missed payments to credit reporting agencies, and credit card companies will increase your APR after one missed payment. Additionally, after three missed mortgage payments, some lenders will start foreclosure proceedings.

 Do not make payments using credit cards 

When you use your credit card to make payments on other bills, you are digging yourself into a pit of debt. In addition to paying bills with money that you don’t have, you are going to end up paying more in the end because of the interest you accrue from your credit card company. Avoid this at all costs. 

Do not downplay refusal of credit 

Being refused credit is undeniably a red flag that you may be on the verge of a personal finance emergency. If denied, your credit score may be so low that the company perceives you as a risk. Do not take this lightly. If faced with this scenario, be honest with yourself about your financial woes and take steps to get back on track. 

Do not take cash advances on your credit cards 

While it may seem like an easy way to get fast cash, taking out a cash advance on your credit cards is a bad idea. First, cash advances on your credit card usually come with a hefty transaction fee. Second, cash advances are usually subject to significantly higher interest rates than ordinary credit card transactions and are not included in interest-free periods. 


The signs that you’re flirting with a financial disaster may not be clear when committed individually, but a few of these combined should be an obvious red flag to any consumer. However, with a little mindfulness, you can acknowledge bad money behavior in time to avoid any long-term damage. Fortunately, you don’t have to go it alone. There are numerous free financial resources to help you get back on track.



American Consumer Credit Counseling (ACCC) provides non-profit credit counseling and debt reduction services for consumers with credit problems who want to know how to pay off credit cards and how to get out of debt. Our certified credit counselors have helped thousands of individuals and families nationwide pay off credit card balances and unsecured debt through credit card relief programs and credit card debt solutions. Our debt management plans provide a kind of personal debt consolidation strategy for help getting out of credit card debt, and we offer a wide variety of financial education services to consumers who need help getting out of debt and managing their finances more effectively.

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