Common Signs That You
Are Headed
For Financial Disaster
By Keith Rawlinson
Volunteer Budget Counselor
I have some great eBooks available. Click HERE for more information.
If you ever see one or more of the
following signs
in your financial life, it is a very strong indication that you are
headed toward serious financial difficulty. It may be sooner
or
it may be later, but if you experience any of these signs, you will
most likely find yourself in financial trouble. Never ignore
any
of these signs. As soon as you become aware of one of these
things happening in your life, take immediate action to correct it; if
you don't, you will only have yourself to blame when things get worse
down the road. Trying to correct a problem later will be much
more difficult than correcting it right away.
Overdue bills
The first time you find yourself unable
to pay a
bill by its due date, is an indication that you are not adequately
planning ahead. Try to pay cash for everything you buy; but
if
you are gong to borrow money, make sure you are only buying
things you can
easily afford
the payments for. Eliminate as many payments as you
possibly can. Make sure you don't have too many luxuries in
your
life that are requiring too much of your income--a luxury item can be
anything that is nice to have, but you don't actually need in order to
live Create a written budget
and follow it.
Carrying a
credit card balance over from one month to the next
Credit cards are an easy and convenient
way to get
deeply into debt very quickly. If a credit card is used at
all,
it should only be used for planned, budgeted expenses and should be
paid off in full each and every month. Making only the
minimum
payment on your credit card will keep you in high-interest debt for a
long time. If you make little more than the minimum payment
on
your credit card, it could take you years to get it paid off,
assuming you make no further charges on it. If you can't pay
them
off every month, get rid of your credit cards; then, if you still feel
you need a credit card, use a debit card instead. A debit
card
forces you to only spend money you already have in your bank account
instead of going further into credit card debt.
Having no
savings
If you have little or no savings, you
are only one,
unexpected emergency away from potential financial disaster.
If
you don't have adequate savings, things such as a home repair, a car
repair, loss of a job, illness or injury just to name a few, will force
you to either borrow money, run up your credit card, or divert money
from other expenses that need to be paid. A good rule of
thumb
for a minimum amount of savings is three months worth of
income.
Six months worth of income is even better and should be what you strive
to have. If you can't save up these larger amounts, make sure
you
are at least saving something every month. You will be
establishing the good habit of saving regularly, and every dollar you
save will be one less dollar you will have to come up with in an
emergency. Try to use your savings only for emergencies or
for
planned expenses in the future. Don't wait, start saving
regularly right now. Make sure you read my article entitled: You Need Savings.
Being unable to meet basic family needs
Not having money for a TV, stereo, newer
car or a
vacation is one thing, but not having the money to pay for food, rent,
mortgage, utilities, shoes, clothing, medical care or anything else that is a basic
necessity of life is a sure indication of impending financial
difficulty. This is especially so if those you can't provide
for
are your own children or dependents. The inability to meet
basic
needs is often caused by spreading your finances too thin; usually, you
have too many payments. Perhaps you bought too much house, or
are
paying for too much apartment. Maybe you have a nicer car
than
you can afford. Maybe you have too many luxuries in your life
such as cable TV, high-speed Internet, expensive vacations, eating out
too often, etc. If you can't meet basic needs, the solution
is to
get rid of things you don't need, or replace them with something you
can afford. If you don't correct this problem, it will
eventually
force you into more debt as you borrow money or use credit to meet
basic needs.
Counting on
future raises to bail you out
If you are having any difficulty meeting
your
current financial obligations, and find yourself saying something like
"as soon as I get that next raise, everything will be fine," you are
setting yourself up for future financial difficulty. For one
thing, you can never be certain you will have increased income in the
future--you can't even be certain you will have a job. If you
are
counting on an increase in income and it never happens, you are
guaranteed to have future financial difficulties. Future
raises
are for future expenses, not current ones. Just make sure you
plan your spending based upon your current income. Plan as
though
you will never have more income than you have right now. If
you
don't have enough money now, adjust your current spending instead of
waiting for an increase in your income.
Lying to anyone about
anything related to money
Whether it's a family member or a
creditor, lying to
anyone about money is an early indicator of the potential for serious
financial
problems down the road. Lies about what you spent money on,
how
much you spent, how much you earn, or why someone hasn't received their
payment is just a way of putting off dealing with a problem that is
going on right now. Financial problems only get bigger with
time. Usually, lying to others about money is related to at
least
one other sign on this list. Find the real reason why you
lied
about money, correct it immediately, then promise yourself you will
always be honest in dealings with money. Remember, much of
the
time you think people are fooled by your lies about money--they
aren't. You are only making a fool of yourself, giving others
a
reason not to trust you now or in the future, and setting yourself up
for financial difficulty.
Saying: "We'll get the
money somewhere," "We'll pay for it somehow," or "I'll borrow the money
if
I have to."
As soon as you catch yourself saying
anything like
this, it is a sure sign that you are headed for financial
problems. Thoughts like this often lead to buying something
you
can't afford, buying something nicer than what you can afford, or
putting yourself deeper into debt. Saying something like
this,
often indicates you are buying on impulse (something you weren't really
planning on buying,) or talking yourself into spending money you
shouldn't. It usually means that you aren't following a
written
budget. If it is something you truly need or were
planning on
buying, it probably means you don't have enough savings.
