While plenty of individuals live from paycheque to paycheque, most consumers know they should be saving money and reducing debt. The recession has drummed that concept into everyone’s head as people have watched their neighbours and friends lose jobs and sometimes their home. Many people say that money worries keep them awake at night, but that doesn’t necessarily translate to imminent bankruptcy. How do you know when you are truly teetering on the edge of a financial disaster versus simply needing to do a little belt-tightening?

Here are nine signs that indicate you are heading for trouble and may be unable to pay your mortgage in upcoming months:

1. Late Fees

If you missed a payment or let your bill go past due because you didn’t have the money to pay your mortgage or another bill on time, you need to re-evaluate your budget. Not only does this indicate an imbalance between your income and expenditures, but it will also ruin your credit score, potentially causing your creditors to increase your interest rate.

2. You Can’t Pay All of Your Bills

Every month, you must decide which bills to pay and which bills to ignore. A lot of people opt to pay their credit card bill to stop harassment from the credit card company and to make sure they have available credit. But it is far more important to pay the bills that protect your home first. Always pay your mortgage first so that you will have a place to live. Next, pay for your car so that you can get to work and keep your job.

3. Making Minimum Payments on Credit Cards

In your mind, paying the minimum due on each bill may mean you are keeping up with your financial commitments, but financial experts know that minimum-only payments are a key indicator of financial distress. While this may mean that you carry too much debt, this also means that all your income is barely covering your spending. Take a careful look at your mortgage payment, other debts and your income to get back on track. Paying only the minimum on credit cards will extend your debt for years and amass expensive interest payments.

4. No Emergency Savings

While amassing six to twelve months of funds to cover you expenses, as many financial planners now recommend, may be a monumental task, every homeowner should have at least one month’s worth of expenses in the bank. At the very least, you need to have enough money in a savings account or a money market fund to pay your mortgage for one month if your income drops or disappears. If you cannot save that much money you need to seriously evaluate your overall household budget.

5. You Can’t Afford Maintenance

Your home needs to be painted and your dishwasher broke two months ago. If you are ignoring basic maintenance because you cannot afford to buy paint or call a repairman, this is a significant indication that you are in financial trouble. Not only does this show that you don’t have any emergency savings or a home maintenance budget, but this will also reduce the value of your home.

6. Reduced Income

Money is already tight and now your work hours have been reduced or you have been laid off. If meeting your monthly budget depends on every dime you earn, then even a small reduction in income can be a disaster. Search for a new job or a second job and, at the same time, start slashing your budget as much as you can.

7. Using Credit or Cash Advances to Pay Bills

You are using your credit cards or, even worse, cash advances on credit cards to pay other bills such as a utility bill or to buy groceries or just to have cash in your pocket. This is a strong indication that your spending is outpacing your income and it is extremely expensive. You need to put yourself on a debt management program or perhaps meet with a credit counselor to straighten out your finances.

8. Using Your Retirement Fund

You have borrowed money from your retirement account for your mortgage payment or other debt. This could seriously jeopardize your future financial security.

9. You’re Maxed Out

One or more of your credit card balances has reached or, worse, gone over the limit. If you are transferring your balances to new accounts in order to avoid paying the debt, this is a sign of a financial imbalance. If you are applying for new credit cards because your other cards have reached their limit, you are in serious danger of a financial meltdown. While you may be making your mortgage payments just fine, if you cannot control your use of credit cards it can be an indication that housing payments are too high.

While these financial woes can mean that you cannot afford your home, they may also be a sign that your spending is out of control. For most people, the mortgage payment is the largest monthly bill, so they often assume that the size of their mortgage is the problem. If your housing payment fits into that budget but you are having difficulty making your payment, then the issue may be that you have taken on too much other debt. Whether the problem is your mortgage or your other debt, you need to find a way to reduce your spending and/or boost your income before the situation gets worse.

The Bottom Line

Handling financial problems is never easy, but the first step is always to know what you owe. Solutions can only become clear once you have every bill written down with the amount owed, the monthly payment and the interest rate you are being charged. Pencil and paper work just fine, or you can create a spreadsheet or invest in some personal finance software. The important thing is to know where you stand so you can create a plan that will get your money under control.