Rotors began to fail in GE turbines at customers’ plants. The financial media seized on the issue, and fears arose that the company might not be able to sell any more of its lucrative turbines. The division fell into a deep financial downward spiral.

His assignment seemed more than he was capable of handling at that time, and a veteran turbine expert was brought in to deal with the debacle. Mr. Little was sidelined. In many companies, he would have been jettisoned.

But GE still saw promise in him, especially because he reacted well to the setback, working to help the person who replaced him. Mr. Little was a brilliant technologist, and he understood business, so the company stuck with him. His boss gave him encouragement, and told him that the chief executive officer and senior vice-president in charge of human resources wanted to meet him at headquarters. Not to bury him, as it turned out, but to praise him, and to tell Mr. Little he had a strong future with the company.

That was an unusual response. But it paid off. Today, he oversees GE Global Research and is part of the inner circle of about a dozen executives reporting to the CEO.

In The Talent Masters, a look at companies such as GE that are adept at dealing with their staff, Bill Conaty, the senior vice-president of GE who met with Mr. Little at that crucial juncture, and Ram Charan, a noted counsellor to CEOs, say the incident shows that talent masters recognize that great leaders are likely to emerge stronger from setbacks. Through the rigour of their staff evaluation systems, the top executives at such companies really know their people.

“Mark wasn’t just a name on our list but a guy we knew thoroughly,” Mr. Conaty recalls in the book. “We knew what he was going through. We tried to put ourselves in his shoes and said, ‘How would we feel if this was happening to us?’”

The theme of the book is that talent masters put people before numbers. As the subtitle of the first chapter puts it: No talent, no numbers. While companies all talk about employees being a priority, the reality is usually different.

“If businesses managed their money as carelessly as they managed their people, most would be bankrupt,” the authors write. “The great majority of companies that control their finances masterfully don’t have any comparable processes for developing their leaders or even pinpointing which ones to develop.”

The authors offer some assistance, beginning with principles such as these:

An enlightened leadership team, starting with the CEO: The chief executive officer should recognize that his or her top priority for the future is building and deploying talent effectively.

Meritocracy through differentiation: Talent masters dig into the many causes underlying performance to recognize and reward people according to their talents, behaviours, and values. If you fail to differentiate between people, to determine (and reward) your best people, you will end up with mediocrity rather than a meritocracy.

Working values: The values the company espouses are actually in operation. People who violate the values, even if otherwise luminous, will be dumped if they can’t change.

A culture of trust and candour: A company can’t develop its people unless candid discussions are held to evaluate those people and give them feedback on performance. “Creating a culture of candour is the hardest part of becoming a talent master,” the authors stress.

Rigorous talent assessment: Talent masters have the same goal-and-results orientation in their people processes as in their financial systems. This isn’t soft stuff. It’s rigorous, and repetitive.

A business partnership with human resources: HR isn’t second tier. It is an active part of the operations of the company, and its leaders have the same business focus.

Continuous learning and development: The ever-changing business environment means that leaders’ skills and leadership criteria are always being updated.

The meat of The Talent Masters is in how such criteria are put into effect, in different ways, by the companies studied. The authors detail GE’s talent systems and also look at four other companies that are very strong in this field, as well as some others that are just starting to grapple with the issue effectively. This is an important topic, and the authors’ insider knowledge and practical focus makes this rich reading for executives and HR professionals.

Source:
Harvey Schachter

Posted on Tuesday, January 4, 2011 5:58PM EST

Traditional sales training programs ignore the biggest obstacles to success. Instead, they focus on specific sales and closing techniques. But the biggest obstacles are not sales talent, motivation or knowledge of techniques. The biggest obstacles, like those overcome by champion athletes, are the internal, mental and emotional barriers that sales professionals face on a daily basis..

Below are three powerful components of the mindset of a champion. Put them into action today and watch your sales performance skyrocket!

Take Charge of Your Internal Dialogue:

Engage the linguistic nutrition of championship performance Your self-talk is the foundation of your belief system andyour belief system determines your attitudes about your success or lack of it in your sales career. Inner thoughts either set you up for success or failure. So often, people unconsciously use self- limiting thoughts which prevent them from being successful. It’s a form of unintended self-sabotage. Examples of such self-talk phrases, are: “The economy will make this a tough sell now” or “I’ll be lucky if I make half the sales I made last year.” These kinds of thoughts are like eating junk food once you decide that a healthy eating lifestyle is just too difficult to maintain. Your thoughts set you up for failure. Your thoughts determine your beliefs and your beliefs develop your attitudes, which determine your behaviors and actions. Therefore, negative, pessimistic thoughts will ultimately lead to procrastination and poor sales outcomes. Such thoughts actually convince your mind that you will fail.

Action Plan 1: Keep a written journal of negative thoughts that enter your mind regarding your sales performance and notice the patterns. Then, use rational thinking to counterpunch each negative thought with a healthy, positive thought. Example : Change “This economy will drive my customers away now.” to “I don’t have to be successful with every client. This is a numbers game. I am a sharp, creative person and I’ll find new markets/customers for my product, despite the economy. I’ll keep my eyes open for opportunities, which I really believe will present themselves.”

Unleash the Power of Your Mind:

Plow through the mental road blocks to championship performance Your subconscious mind takes orders from you without judging success or failure. You always have the choice in what you feed to your subconscious mind. Therefore, you must believe in yourself and in the value of the products you are selling. Eliminate “imposter fears,” which are the belief that you really are not good at what you do or your products are really not as valuable to potential customers as you propose they are.

So often, salespeople focus on their failures and what they did not achieve. Instead, you need to focus on what you have achieved. You can actually program your mind to believe in your strengths and your ultimate success. Just as athletes focus on their strengths, you can focus on yours. Always remember that your product knowledge, your customer service skills and your sincere concern that the customer is satisfied and better off having purchased your products or services will overcome any deficiencies you see in yourself.

Action Plan 2: Practice presenting a positive attitude toward everyone you meet, not just prospective clients and customers. Constantly pat yourself on the back with positive self-talk, such as, “I provide a valuable service to my clients” and “I help people achieve their goals.”

Focus on good results you have achieved in your sales career and pat yourself on the back. Learn from results you were not pleased with in the past and move on. Keep a SUCCESS JOURNAL. Record times you were on a roll and situations where you were really proud of what you accomplished. Each day put at least one item on your list. Review the list of successes regularly, especially when you are having a worrisome day.

Fill Your Mind with Optimistic Expectations:

Unleash the most powerful mental tool that drives championship performance Research conducted over 30 years with over one million participants has determined that there is a single, powerful predictor of sales achievement-optimistic expectations. Ability and motivation in ones’ sales career are not always enough to guarantee consistent results. Expectations of success or failure are self-fulfilling prophecies that often determine the outcomes, regardless of ability and motivation. The research also shows that people who develop learned optimism live longer and healthier lives, so there are major benefits that go far beyond your career.

The key here is to believe that you will succeed, despite the challenges, obstacles and setbacks that are inevitable in your sales career. Continue to believe you will succeed, even in the face of resistance, rejection and hostility. How you explain to yourself and react to setbacks in your sales career is a crucial determinant of how successful you will ultimately be. Training yourself to look at setbacks as temporary challenges and minimizing those setbacks with the knowledge that you can find a solution and overcome them, predicts ultimate success.

Action Plan 3: Developing optimistic expectations can be learned! Even if you are a chronic pessimist and your parents or spouse is a pessimistic thinker, you can absolutely learn ways to overcome the negative beliefs that underlie your pessimistic explanatory style. Revisit Action Plan 1 (above) because the best way to develop an optimistic explanatory style is by understanding your own negative thinking patterns and practicing changing them. You can also get cognitive training from a professional psychologist or by attending training seminars directed at teaching you learned optimism. Such training will do wonders for your career and in your life!

Source:
Jack Singer. The American Salesman. Burlington: Oct 2010.

Customers are looking for relationships that deliver unique value. Yes, they want your products to solve their problems but they also seek a level of satisfaction that goes beyond the intrinsic value of what they paid for. By learning to tap into this deeper level of emotional satisfaction, your business with current customers will increase and you will uncover a steady stream of new customers.

Are Your Customers Loyal?

You may have asked your customers if they were satisfied with their purchase from your company. But the true measure is whether your customers are actually coming back. In an average customer poll you may find that 8 or 9 out of 10 customers were satisfied. That sounds great. But studies show that only 4 or 5 purchase from you again. Why? Because rational satisfaction (they were not displeased, the product worked, etc.) is only part of the equation. Customers who purchase again are emotionally satisfied. Moreover, emotionally satisfied customers will also recommend your product or service to others.

The bottom line on measuring loyalty: (1) How many of your customers intend to purchase again, and (2) how many of your customers would endorse your company to others.

Creating Exceptional Value

Exceptional value is created when your customer perceives your product or service to be worth more to them than the price they pay. There are two components in any strategy for creating exceptional value with customer. The first is how well you communicating the unique value of your products and services as compared to alternative solutions in the marketplace. This is important and is likely to result in a high rational satisfaction. However it takes emotional satisfaction to develop a loyal customer. The second factor – building deeper, trust-based relationships – is the key to emotionally satisfied customers. This happens when your employees show your organization understands a customer’s needs, delivers more than is expected, and helps them achieve their goals.

Exceptional value stems from exceptional employees. Your people are the “secret sauce” in your organization’s ability to deliver on its value promise. You have to hire and retain the right people to make it work. These employees are those who do not need management mandates to engage customers and adhere to company values. These employees are your customer’s problem solvers. They provide the discretionary effort and intellectual capital that can take your customers from satisfied to loyal. And, studies have shown that an increase of only 5% in customer loyalty can add from 25% to more than 100% to your bottom line!

Tapping the Emotional Fountain

Developing emotional satisfied customers who enjoy extrinsic value (beyond functional benefits) might seem like a pie in the sky ideal but there are many world examples. Think about a Rolex watch and what you feel when you see one worn. Any watch can give you the time. But they aren’t a Rolex. What captivates us about a Rolex isn’t its function, it’s the prestige. ARolex suggests more than your need to tell the time. It says that you appreciate the finer things. It shows that you have earned enough success to purchase one. It means you are knowledgeable about the value of the craftsmanship and precision it represents.

That is the connection you should seek to develop with your customers . You want to deliver more value than the functional benefits inherent in your product or service. You want your customers to experience the extrinsic value you bring to the relationship by being emotionally engaged throughout the buying process.

It Pays to Be Ethical

A recent USA Today poll revealed that 72% of people will pay more to use the services and products of a company they perceive to be ethical. An easy example of this for consumer products is the higher prices that consumers pay at eco-friendly stores like Whole Foods. For service-based businesses, think of the movement of customers away from the megabanks who charged hidden fees and left customers navigating though a labyrinth of automated phone systems to credit unions and community banks where a real person answers the phone with a sincere interest in your situation.

These are examples of how the perception of ethical business practices can make a difference. It reflects the impact of emotionally satisfied customers. People feel better about themselves when they believe they are dealing with an organization that cares about “doing the right thing”.

By optimizing the key performance drivers of value creation, you can successfully tap the emotional bonds of your customer relationships. This takes the right people, the right process, the right leadership, and the right commitment. The investment your company makes in enabling and aligning your team with the skills, attitudes, beliefs and values that develop loyal customers will enrich your core business and provide new opportunities to gain customers and market share. Stay engaged and stay ethical in your customer relationships and you will transform your business.

Source:
Walt Zeglinski. The American Salesman. Burlington: Oct 2010.

In a small, windowless room at the Louis-H. Lafontaine Hospital in Montreal this winter, 80 employees, from psychiatrists and nurses to custodians and support staff, will undergo a series of psychological tests designed to stress them out.

How stress affects the human body

Before and after each test, the subjects will be asked to spit into a small plastic vial, their saliva used to detect the hormones that are released when the brain is faced with a stressful situation.

The point of the study? To see how results vary according to what jobs we do – and whether those of us with less flexibility to juggle work and family demands, with less control over our schedules, have chronically higher levels of stress.

If this is true, the researchers believe their findings will not only indicate something about what we do for a living, but about our future health – with serious side-effects for public, as well as personal, priorities. “I hope I live to see the day when we have a ribbon for stress research like we do for breast cancerhttp://images.intellitxt.com/ast/adTypes/mag-glass_10x10.gif,” says Sonia Lupien, director of the hospital’s Centre for Studies on Human Stress, which will conduct the study. “The cost of stress is amazingly high.”

Across the country, people are experiencing increasing levels of stress. A poll commissioned by The Globe found that Canadians endure, on average, 14 stressful episodes a week. That might not come as a surprise to the researchers behind the latest report from the Canadian Index of Wellbeing, which recently revealed that one working person in five is experiencing high levels of “crunch time” – periods when they feel overwhelmed by overcrowded inboxes and jammed weekly schedules.“We are paying a steep price for this time crunch,” Roy Romanow, chair of the agency’s advisory board has warned. “We’re less healthy, both physically and mentally. We have less time for personal pleasures. And we’re more dissatisfied with the quality of our lives.”

The former Saskatchewan premier has already called for a national dialogue on public policy. Now, a growing chorus of scientists is calling for action as well.The first order of business is to reduce our stress level, something that a growing body of evidence suggests can no longer be dismissed as a psychological problem easily solved by having a deep tissue massage or spending a few days on the beach.

Chronic stress caused by taking on too much – both at home and at work – has been linked to a wide range of serious health concerns, from Alzheimer’s and depression to obesity, diabetes and heart disease. In Canada, hypertension is the No. 1 reason people go to the doctor, and last year accounted for almost 20.7 million medical appointments.

The physical and psychological ailments brought about by stress are believed to be a major reason absentee rates for full-time employees have shot up 43 per cent in the past 10 years. Canadians miss far more work days for personal reasons than both their British and American counterparts. At least one think tank estimates that stress-related absences cost employers more than $10-billion a year, with an additional $14-billion impact on the health-care system.

The situation has become so serious that scientists such as Dr. Lupien want to reframe work-life balance as a public health issue. She hopes to see her saliva test become part of an annual checkup, monitored by physicians as frequently as cholesterol and blood pressure. “It’s difficult to get this addressed in the doctor’s office because they see stress as a yuppie thing,” she says. “But this is what predicts disease.”

STRESS, ON A CELLULAR LEVEL

For scientists who study work-life balance, the stress triggered by the lack of control over our lives is an evolutionary response, not a state of mind. Any time we’re in a situation beyond our control, the brain releases two hormones, cortisol and adrenalin, which allow us to engage our fight-or-flight response – without them, we would not recognize or react to danger. But when a brain is constantly stressed, confronted with a daily onslaught of overwhelming situations, it begins to pump out these hormones in excess, throwing off the body’s other systems and overpowering the immune system.

Even people who believe they thrive on stress or accept it as part of their chosen profession have a physical response to it they can’t control.

Research has shown that high levels of cortisol and adrenalin change the way the body stores fat, leading to higher rates of obesity, and increase its production of cholesterol and insulin, which cause heart disease and diabetes. They even change us on a cellular level, wearing away the telomeres that protect our chromosomes and causing us to age more rapidly.

These changes aren’t reversed when a person decides to slow down. “Once you are a hyper-secreter of cortisol, you always will be,” Dr. Lupien says.

In addition to being found in saliva, cortisol can be measured in an individual’s hair, where the hormone’s build up can be tracked over months. Many scientists believe these diagnostic tools can help predict, and possibly prevent, a range of serious health problems.

Consider this: Last month, two researchers at the University of Western Ontario said they have found that hair samples from men who recently suffered heart attacks showed their cortisol levels were elevated for three months before being hospitalized.

Attempts are being made around the world to uncover how health problems are triggered by the way we work.

Harvard researcher Lisa Berkman recently studied 400 employees at four nursing homes in Boston to examine the impact different types of supervisors can have.

“The stunning thing we found was that managers who scored very low on creativity in managing work-family conflicts had employees who scored much higher in terms of their cardiovascular risk,” she says. “They were more likely to have diabetes, they were more likely to have hypertension, they were more likely to be overweight, than people with managers who were more adaptive.”

Similarly, the renowned Whitehall Study has tracked 18,000 members of the British civil service since the 1960s, and found that employees’ health varies profoundly according to how they are treated. People who have less control over their jobs and feel overextended or without support have a markedly higher incidence of obesity, higher prevalence of underlying illness, higher blood pressure and increased risk of heart disease.

“Your whole lifestyle, everything about your health, is influenced by these worries, anxieties, the lack of a support system in your job, in your life,” says Bruce McEwen, a neuroscientist at New York’s Rockefeller University who is considered the godfather of stress research. “This is something that has a disproportionate effect on our health-care systems and on our productivity.”

STRESS, THE NEW SMOKING?

The problem has become so profound that governments are starting to take notice.

Last month, the U.S. Department of Health and Human Services made stress the focus of its annual campaign to raise awareness of a vital mental-health issue.

And this month, European MPs voted to extend fully paid maternity leave to five months, as a way of easing the burden on young families.

Chinahttp://images.intellitxt.com/ast/adTypes/mag-glass_10x10.gif, meanwhile, has responded to growing concern over public health by reinstating mass calisthenic routines that were launched by Mao in 1951 but dropped in the lead up to the 2008 Olympic Games.

Lisa Raitt, the federal Minister of Labour, is currently doing cross-country public round tables on the issue of mental healthhttp://images.intellitxt.com/ast/adTypes/mag-glass_10x10.gif and the workplace, and says work-life balance is emerging as a serious problem.

“The worst thing possible is for someone to get so unbalanced that they have to go on long-term disability or take sick days or go to work and just go through the motions,” she says. “It is one of the biggest issues we have out there in the workplace.”

The Public Health Agency of Canada has taken major steps to mitigate the damage of work-life conflict and stress. The Healthy Living Fund, Cardiovascular Health Awareness Program and a new national mental-health strategy, due to be completed in 2012, are all designed to combat conditions linked to stress, including high blood pressure, depression, gastroenteritis and hypertension.

But experts say that more direct action is needed.

Dr. Lupien says physicians should monitor stress and show patients how to control it, while Dr. Berkman at Harvard says the onus should be on governments to protect work-life balance just as it enforces occupational safety standards and non-smoking bylaws.

“We don’t ask individuals to take sole control of those issues because we understand that they’re more effectively managed at the state or federal level,” she says. WHEN BIOLOGY TRUMPS AMBITION

Researchers insist there is no magic pill – the human stress response is, as McGill’s Dr. Lupien points out, necessary for our survival, so it would be suicide to eliminate it.

But if we don’t get our lives under control, learn to prevent our stress levels from rising, and deal with the causes of chronic stress, the hormonal cocktail released by the brain will continue to take its toll.

“People say they thrive on stress,” Dr. Lupien says. “That may be true – they may enjoy it – but it doesn’t mean it’s not impacting you physically.”

The pioneering Dr. McEwen feels the key is to realize that being too busy comes with a cost.

“People complain about how overwhelming their lives are, but they don’t connect it in a biological sense with the problems they experience: eating too much, not sleeping well, not being physically active,” he says. “So how do you get the attention of policy makers, business and the public?”

He suggests showing skeptics a magnetic-resonance image of two brains: one that’s normal and one that belongs to someone suffering from chronic stress. In the latter, the hippocampus – the region responsible for memory formation and linked to Alzheimer’s disease – will be visibly smaller.

“That might make them realize that their biological organs are paying a price. There comes a time for everybody when they have to take that seriously.”

Source:
Siri Agrell
From Saturday’s Globe and Mail
Published Friday, Oct. 29, 2010 2:22PM EDT

The percentage of Canadians using mortgage brokers to buy their homes has increased significantly, according to a report released yesterday.

The Deloitte report, Winning Strategies in the Brokered Mortgage Marketplace, said that in the 1990s mortgage brokers numbered in the hundreds and were “lenders of last resort” for borrowers unable to obtain a mortgage directly from a bank or credit union.

“Over the last decade, an increasing number of viable options for borrowers have surfaced,” said the report. “In addition to branch-based lenders, borrowers can now consult with the banks’ own mobile mortgage specialists as well as independent brokers — while also conducting their own research online.

“In this changing and information-abundant environment, the mortgage brokerage channel has emerged as a legitimate competitor.”

The report said share of origination transactions increased from 26 per cent in 2003 to 38 per cent in 2009 as mortgage brokers made particular inroads with first-time homebuyers and young Canadians.

“Overall, this channel has evolved from a fragmented ‘lender of last resort’ network to a legitimate option for prime customers.”

Jim Murphy, president and CEO of the Canadian Association of Accredited Mortgage Professionals, said the organization will be releasing its annual report in early November.

“Mortgage broker share overall is about 25 per cent of the market,” said Murphy. “It’s higher for first-time buyers. First-time buyers are more likely to use a mortgage broker than those that renew their mortgage.

“The percentage of mortgage brokers is higher in Alberta and British Columbia overall.”

Murphy said the percentage of mortgage brokers has grown significantly although in recent years it has levelled off.

“Brokers were very much seen in many ways 20 years ago as the lenders of last resort. So you couldn’t get a mortgage through a credit union or ATB or the bank and you went to a broker,” he said.

“That’s changed dramatically in the last 10-15 years. Brokers are seen in a much more positive light.

“They shop the market. They have access to different lenders including banks and credit unions and they really work on behalf of the customer.”

Source:
By Mario Toneguzzi, Postmedia News October 28, 2010

While there are no statistics on these types of fraud in Canada, in the United States, it is estimated to cost victims between $4-billion and $6-billion (U.S.) a year.

“Mortgage scams are carried out in all different forms and involve a multitude of people, some who don’t even know they’re being taken advantage of,” says Diane Scott, president of the Calgary Real Estate Board.

Ms. Scott says at least two types of mortgage fraud have occurred in Calgary this year. One is property flipping, in which a dishonest seller artificially inflates the value of a property using a phony appraisal and then sells it for a large profit. The phony appraisal often remains with the property through multiple transactions, making it difficult to determine the property’s true worth, and the end buyer is left paying for a mortgage that is much higher than the home’s value.

The other involves “straw buyers,” who are offered money to lend their identity and good credit record for use on fraudulent mortgage applications. The fraudster uses the information to apply for a loan, then disappears with the money, leaving the straw buyer on the hook for the mortgage payments.

Other types of real estate scams include title fraud, where your identity is stolen and used to assume the title of your property, which can then be used to sell your home or get a new mortgage. The criminal takes the mortgage money and runs. You may not even find out about the fraud until the lender contacts you or someone pulls up in a moving van, claiming to be the new owner of the house.

And there’s also foreclosure fraud, in which a homeowner having trouble paying a mortgage is offered a loan in exchange for up-front fees and an agreement to transfer the property title to the scammer, who is then able to take the victim’s loan payments, sell the house or remortgage it and leave with the money.

While a lawyer, realtor or licensed mortgage broker can help ensure all legal precautions are taken, it’s still important to do your homework before you buy, Ms. Scott says. Here’s her advice on how to avoid becoming a victim of fraud:

1. Beware of unusual offers. Never lend your identity to anyone or sign documents you do not fully understand. “If it sounds too good to be true, then it probably is,” Ms. Scott says.

2. Do the math. Look at the listing history on the property and do a comparative market analysis. Check the number of sales and price ranges for the community. If the home’s listing price is much higher than the average value of neighbouring homes, it could mean someone is flipping the property or has had it fraudulently appraised.

3. Don’t assume the seller is honest. Get your own realtor or independent representation for your purchase. If the seller objects, something is wrong.

4. Do a land title search. This will show the name of the property owner, any mortgages or liens registered on the title, as well as previous sales and transfers. You can also buy title insurance to protect against title fraud.

5. Get your own appraisal. You may want to include, as part of your offer to purchase, the option to have the property appraised by a member of the Appraisal Institute of Canada.

6. Secure your deposit. Make sure your money is being held in a real estate trust account by a realtor or lawyer. This will ensure your money is safe until the deal closes.

Source:
DIANNE NICE

Last updated Monday, Oct. 18, 2010 6:34AM EDT

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.

Source:
Michele Lerner
Investopedia.com
Published Friday, Oct. 08, 2010 6:08AM EDT