Four Signs You Are On the Road to Financial Disaster

Personal Finance

Like most things in our complex life, debt doesn’t build up over night but over periods of time. Creating dreadful financial habits and making bad buying decisions clearly allow debt to surmount to uncontrollable amounts. I want to list 4 warning signs that debt is close to spiraling out of control. With that being said I will also list possible solutions to help you pull ahead.

1. Your credit card debt is considerably more than it was 3 months ago.

You hear it all the time, “Get out from under the firm grasp of your credit card companies” This is the number one unsecured debt that can literally destroy you financially and must be used with the utmost care. Nowadays, credit card companies are charging up to 28% interest for consumers with A+ credit. Why you ask? Because unfortunately they can. If you just pay the minimum payments on credit cards you could literally take years or even decades to pay them off.

Tip: Ideally, you should pay your balances off in full each month, if this is not possible, your goal should be to pay double or even triple the minimum payment. Never purchase something with your credit card that you wouldn’t purchase using cash in hand. Keep in mind, that purse or fishing rod you spent $200.00 for could ultimately cost upward of $400.00 paying the minimum payment. Credit cards are doubled edged swords when it comes to credit ratings, they can help your score but also impact it negatively. If you have a revolving balance, try and get the balance below half of the allotted credit limit to positively improve your credit rating.

2. Your bank account is consistently overdrawn.

This is pretty obvious but you would be surprised how many people live paycheck to paycheck. If you are receiving those friendly reminders from your financial institution on a regular basis then you should stop and reflect as to why you’re receiving them.

Tip: Ask your bank about overdraft protection, which will allow you to utilize a secondary account to draw funds from if in the event you don’t have the available monies in your checking. This will at least help prevent any overdraft fees. Your main objective should be to sit down and track your spending and to put together a budget according to your earned monthly salary and bills.

3. You’re not sure how much you owe.

It is very important to carefully watch how much you are spending out and how much money is being allocated to pay both interest and principal. With conveniences such as the internet, there is no excuse for not monitoring debts. This doesn’t mean to dwell on debts but come up with a plan of action to pay debts off sooner than the amortized schedule. This is not the time to put your head in the sand and wish the debt away.

4. Your savings account looks like a busted piggy bank.

It is more important now to save than ever, with rough economic times and companies diminishing by the day, savings should be a top priority. You should have a plan to save for both short term emergencies and have a long term savings plan for retirement as we all know SSI will be a thing of the past come 30 years from now. Experts agree you should save at least half of your annual salary in the event you were to become very ill or lose employment.

 Tip: Have your employer automatically allocate 10% of your salary into a savings account or money market account. Avoid getting a debit card to prevent temptations to withdrawal the funds for materialistic desires.