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Common Signs That You
Are Headed For Financial Disaster

By Keith Rawlinson
Volunteer Budget Counselor

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    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.

Please know that all of the thoughts, information, suggestions and techniques given on this site are nothing more than the author's opinion on the matter being addressed.  Do further research before making any decisions.

This article copyright 2007 by Keith C. Rawlinson (Eclecticsite.com).  All rights reserved.

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