Many people say that they feel surprised when their finances come undone, but there were actually warning flags before this happened.
If you are able to spot these red flags of impending financial trouble then you might be able to stop it before you end up in a bad financial situation. Here is a look at some of those warning signs that could spell financial trouble in the hopes that you can turn it around.
Your Credit Card Repayment Each Month is in High Triple Digits
If you are paying more than R1000 a month to cover your minimum monthly payment then you probably have too much credit card debt.
If you want to make progress on your balance and stop it from growing bigger then you need to pay well above the minimum amount that you owe. However, if you already owe so much on your credit card and you are struggling to pay the minimum then you may find it hard to get some extra cash together. This means that your card balance could easily get out of control. If you are not able to afford more than the minimum then it could take years for you to pay off your balance.
You are Charging Groceries and Petrol and Not Paying It Off
People are using credit cards more and more instead of using cash and debit cards to pay for everyday essentials. This is essentially so that they are able to take advantage of credit card rewards.
However, if you are not paying these expenses off each month in full then it could be that your living expenses are more than your income and you don’t have a financial cushion for your regular expenses.
The use of credit cards for everyday purchases should only be undertaken if you are financially able to pay off the balance for these in full each month.
You Keep Going into Your Savings
If you are constantly going into your long-term savings in order to make ends meet or to pay for unexpected expenses then you may not have enough liquidity to truly pay for a financial emergency.
Ideally, you will want to have at least 3 to 6 months of living expenses saved in an emergency fund to cover an unexpected expense or a job loss. However, it’s a sign that your finances are in trouble if you find that you are using your emergency fund or other savings for expenses beyond your budget.
There are still a few more red flags to know about…
You Often Pay Bank Fees
If you often end up paying for preventable bank fees like out of network ATM fees, late fees or overdraft fees then it could show that your finances are disorganised and are threatening your financial health.
Your Retirement Account Isn’t Growing
If you invest smartly and contribute regularly to your account, your retirement fund should grow significantly each year.
However, if you notice that your numbers aren’t really shifting then you may need to take another look at your investment strategy or you need to look at contributing more to account.
Your Income isn’t Growing
Your savings should be growing every year and so should the total amount that you take in. If your income is holding still then it could mean that you are not performing as well in your career or are not taking enough risks. Also, keep in mind that if your salary doesn’t at least keep pace with inflation then your salary is actually shrinking.
If you have noticed any of these things then you need to take a look at your finances and restructure your budget to fit with what your current financial situation is before things get any worse and you end up with out of control debt.