A review of some of the most glaring signs that you’re headed down a problematic financial path.
“Hindsight is 20/20.”
While that bit of traditional wisdom is no doubt true, it will provide small comfort if you’ve just suffered a complete financial meltdown.
That’s why it’s vitally important to recognize the signs of personal financial disaster before the situation spirals out of control. Many of us tend to wait too long to take action – a “bury your head in the sand” approach that can easily leave your finances in utter ruin.
To avoid such a scenario, it’s critical to address financial problems before they have time to deepen. Or, as another old aphorism instructs us, “an ounce of prevention is worth a pound of cure.”
With that in mind, let’s review some of the most glaring signs that you’re headed down a problematic financial path.
You’re Using Credit Cards In An Unwise Fashion
Do you struggle to make more than the minimum payment each month? Are you caught up in a cycle of shifting balances?
If so, that’s a harbinger of trouble down the road. Failing to make more than the minimum payment for an extended period could cause your rate to jump – something that could exacerbate an already dangerous debt cycle.
Credit cards offer access to much-needed short-term cash and some potentially lucrative bonuses and rewards. When used incorrectly, they can accelerate the path to financial disaster.
Your Bank Statement Is Lousy With Late Fees
Late fees are the locusts of the financial world. They eat away at your bottom line, consuming money that should otherwise be saved, invested or spent on needed goods. When you pay a late fee, you’re doing little more than just giving your money away.
A pattern of excess late fees is also an indication that something may be seriously amiss with your finances. If you can’t stay current with your bills, it’s almost impossible to build a nest egg that can see you through unexpected financial turbulence – just the sort of thing that can easily spiral into a full-blown disaster.
You Aren’t Saving Money
As we noted above, having an emergency fund is critical in times of financial distress. Saving enough money to see you through at least a month’s worth of expenses is a good place to begin.
If you aren’t able to save money at all, that’s a serious red flag. It’s just about impossible to get ahead without saving or investing money. Those who fail to do either are far more vulnerable to financial ruin.
Your Financial Situation Is Causing Emotional Distress
Most of us, on some level, worry about our bills. Yet when this worry becomes pathological or destabilizing, it’s a sign that trouble is looming around the corner.
When we allow emotion to guide our financial decisions, those choices tend to be shortsighted and not always objective. If financial issues are putting you through the emotional wringer, that’s a clear sign that worse trouble may be coming.
You Don’t Know How Much Money You Owe
This is another cause for alarm. It’s exceedingly difficult to budget if you don’t stay on top of your debts. This kind of willful ignorance is also a hallmark of people in deep financial trouble, as they tend to ignore such problems in the mistaken wish they will go away.
Too often the signs of serious financial trouble are glaringly obvious in retrospect. That’s the kind of “hard won wisdom” you don’t want to earn.
By taking note of these signs and taking action immediately, you can arrest your slide toward financial disaster – and significantly improve your quality of life.