Having control of your finances is a huge hurdle. Often times people do not understand how to budget or even save money. Without the proper precautions you could be creating a lifetime of damage. Getting into debt is extremely easy, but finding your way is extremely difficult. When money is tight and you are struggling to even live paycheck to paycheck your finances can spiral out of control quickly.
Being able to identify these warning signs can help to alleviate stress and prevent future problems. Below I have put together a list of 5 warning signs that are a red flag that you are headed for financial failure. Take a look at the list and figure out ways that you can make some changes in your spending habits.5 Warning Signs you are headed for financial failure .... Do you make any of these mistakes? Click To Tweet
Are you headed for financial failure?
1. You use a credit care more than cash. One of the biggest mistakes some people make is using credit more than they use cash. Credit cards basically let you live beyond your means and tempt you to spend more than you should. You end up in debt which only creates a cycle of paying the minimum payment each month and you stay in debt for years.
Stop using credit cards as much as possible. Try to avoid opening a new credit line. I like to have a credit card just in case of an emergency or if you are extremely disciplined and can pay the balance off each month to build your credit than that is okay. I am referring to people who open store credit cards everywhere they make a purchase. Being to pay off your credit card debt and start using only cash to make purchases. If possible, make extra payments each month. If you don’t have enough cash for something, you just don’t buy it until you do. This may be a hard change at first, but it has to be done to prevent you from financial failure.
2. You do not have a savings account. Consider this, you live paycheck to paycheck and then one day an emergency happens. For example, your car needs to be repaired and the cost is $1000 to fix it. If you do not have a savings account, how do you come up with that money? Do you choose between the car and the rent? Or maybe the car and the groceries for the month? Not only are you putting yourself in a tight spot, but you do not want to be a situation where you have to make a choice or turn to your credit cards.
When you are “borrowing from Peter to pay Paul” you are getting yourself into a vicious cycle that will leave you consistently broke and struggling to climb out of a hole that keeps getting deeper. Start a savings account immediately. Add it to your monthly budget and treat it like a bill that needs to get paid. Stick with it and be as consistent as possible and you will be on your way to establishing a decent amount of money in your savings.
3. You do not have a budget. If you spend money spontaneously and do not keep track of your income and expenses you could be headed for financial failure. You may splurge on things that you really do not need or toss bills to the side and forget about them, you will eventually find yourself in a very bad financial situation. Poor spending habits can be improved, but you have to be aware of where you money is going. Don’t get me wrong, I do think you need to splurge every once in awhile and treat yourself to something special. It help to provide extra incentive to work towards savings goals.
Start with making a monthly budget that accounts for everything that you need to pay for during the month. Make sure you add a savings account to your budget and group it with your monthly bills. Then keep track of everything you spend for the next few weeks and see where you are spending the majority of your money and how you can cut back on spending. Once you recognize the areas that you need to improve and stick to your budget you will break those bad spending habits and watch your savings account increase.
4. You are constantly borrowing money. Every so often, people need a little bit of financial help to get by and they may need to borrow money from a friend or family member. It happens and it is completely understandable. If it happens too often though, it becomes a problem. If you borrow money too often, it is just like using a credit card. You are depending on money that you do not have and then when you actually do have money, you have to pay back what you borrowed. This once again leaves you short on cash and you borrow more money. The cycle goes on and on and you are always in debt and always paying someone back.
Only borrow money when it is an absolute necessity. Pay it back in full as soon as you have the money and try not to borrow any money from anyone else again. Look at borrowing as a last resort, when you have no other choice and it is for something that you need and not just want.
5. You do not make enough money to pay your bills. This warning sign is two-fold. Not only do you need to consider a second job or finding a side job, but go back and track your expenses if you do not make enough to cover your bills every month. When you get into debt it can become a vicious cycle that you cannot break no matter how much you try. If you are sticking to a tight budget, making every effort to pay off debt and still are not able to get by, it may be because you just do not make enough money to handle everything in your budget along with paying off your debt. If this is the case, you need more income. If you can get more hours at work or a second job, now is the time. If that is not an option for you then you should explore options like working from home, starting a home based business or selling things online. Sometimes we just do not make enough money to get ahead so we need to find other ways to bring in more money each month.
I am sure this is not something you want to hear especially if you are already working more than 40 hours a week trying to make ends meet. In some cases it may not even be possible to work more hours, but be creative and consider other ways to make money like having a garage sale or selling used items on Craigslist or eBay.
Everybody makes financial mistakes, but there are times when those mistakes can be devastating. Most of the time, we make some really common mistakes that can be fixed with a little bit of effort and the desire to avoid financial failure. If you see any of these 5 warning signs that you’re headed for financial failure in your life, try some of my tips to prevent it now before your debt is more than you can manage.
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