Are You Headed for Financial Crisis? Don't Avoid These 8 Signs!
Many of us are good at ignoring the negative trends in our lives. We may refuse to acknowledge a growing waistline or a relationship that's slowly deteriorating. Many people also ignore the signs of an impending financial Crisis. Most personal economic meltdowns happen over time. They're rarely the result of a one-time event.
The warning signs are quite clear. You need to look and be honest with yourself.
Do you recognize any of these warning signs in your finances?
1. You spend more money than earning
You might be spending more money than you earn when you are in the red every month or when your credit card balance is higher than your income. It's important to remember that there's no shame in asking for help and that it's better to take care of your finances now rather than later when are already in financial crisis.
2. You overdraw your checking account more than once a year
Overdraft fees only make the situation more challenging when you're already struggling to pay your bills with your available income. Overdrawing your account can be a symptom of these things:
- Poor money management. Some bills take longer to clear than others. It's important to do whatever is necessary to stay on top of your pending balance. It can also be a matter of simply failing to pay attention. Having good finances requires regular attention.
- Overspending. Do you have a budget? Are you sticking to it? Ask yourself why you are running out of money before you run out of a month.
3. You're at or near the limit of your credit cards
Your credit score starts to take a hit when you're above 35% utilization. On a card with a $5,000 limit, that would be anything above $1,750. If you're in this situation, you may be tempted to acquire another line of credit. It is usually only a short-term solution with a poor long-term outcome.
4. Relying on a future one-time financial event
Counting on an inheritance or big tax return to balance your financial situation signifies significant debt.
It's important to arrange your finances so that your situation is under control without needing periodic injections of extra income.
5. A failure to save any money
A deposit in your savings account can be viewed as just another expense. If you're unable to make that payment, you're headed in the wrong direction financially.
All it takes is one unexpected bill or job loss, and you're in dire straits. Saving is a better financial cushion than credit.
6. Borrowing money from family and friends
It is another sign of impending financial challenges. Not only is it a sign of financial crisis and your own struggle, but it can also strain your relationships. Most of us loathe asking the people in our lives for money, so recognize the seriousness of the situation if you're considering it.
7. You're dipping into your retirement funds to pay your bills
Stealing from your future is a good sign that the present is shaky.
You're killing the magic of compound interest and likely incurring penalties and taxes by making early withdrawals. You don't have an unlimited amount of time to replace those savings.
8. Using a home equity loan to fill the financial gaps
A home equity loan to pay bills or purchase something you can't currently afford is a bad warning sign. Not only are you financially struggling, but you're also putting your home at risk. Think long and hard before borrowing from the equity in your house.
If you recognize one or more of these financial warning signs, do yourself a favor and start working on a solution. When these financial conditions begin to pop up, it's usually only a matter of time before things get significantly worse. Make strengthening your finances a priority in your life. You'll be glad you did.
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