Warning Signs of Poorly Managed Finances

Today’s guest post is from Noreen Ruth –

Warning signs are everywhere with some so downright hilarious that the seriousness of the issue is lost in the hilarity. For example, “Not intended for human consumption” was a warning on a bottle of bubble bath. Or this one found on the packaging for a set of earplugs, “These ear plugs are nontoxic but may interfere with breathing, if caught in windpipe.” Or this warning on a hairdryer, “Warning: Do not use while taking a shower.” Well, duh!

While we may get a little chuckle from these seemingly silly warnings, their intent to protect is serious business. Consider the consequences of simply ignoring any of these warnings. In the same way, signs that point to poorly managed finances have dire consequences, if you don’t take them seriously.

Ignoring the Wisdom of Others
One reason some people are surprised to find themselves in financial trouble is that they were indifferent to the clues that were clearly on display. Inexperience and arrogance often go hand-in-hand when troubles are left unresolved. Wise advice is considered irrelevant or out-dated for the situation. Those who step up to point out clues to trouble ahead might include family and friends who have more experience to draw from. They offer their help so that you might avoid pitfalls that they may have gone through – perhaps because they ignored the signs.

The right attitude about money is vital to establishing and maintaining excellent financial management skills. If you still rely on parents or friends to support your way of living, you need to resolve your dependency or miss wonderful opportunities for growth and personal success. Money is a means to an end and should be thought of as a tool to be used to build and live a sustainable life.

To write about all of the warning signs of a poorly managed financial lifestyle would fill a book. For our purposes and with word count restraints in place, the most common warning signs are included in this checklist.

• Has Little or No Savings: The target to shoot for is a minimum of six months worth of savings to cover any unexpected job loss or emergency. Without this safety net, you’ll be inviting disaster. A recent survey shows that nearly half of Americans have less than $500 in the bank.
• Doesn’t follow a Budget: Anything well managed incorporates a plan to reach their goals; and so it goes with finances. Without one there’s no direction and will be easy to get off track.
• Insufficient Income/Poor Job Performance/Outdated Job Skills: These issues are interrelated with one impacting the other two and vise versa. Begin by learning a new skill and being more responsible on the job and the income will resolve over time with a new job or a pay raise.
• Uses Payday Loans: Using one of these is an act of self-imposed desperation. Not only are you borrowing on your own future income, you’ll be paying interest to someone else to borrow your own money.
• 5+ Year Car Loan: Pushing an auto loan beyond 60 months is a warning sign that the loan is too much to handle in your current situation.
• Denied a Loan or a Credit Card: If lenders consider you too high risk to approve additional credit, this is a warning sign that you already have too much debt in relation to your income.
• Uncontrolled Credit Card Spending: Credit cards should never be used as supplementary income. Never use one to purchase everyday necessities – do without until cash is available. Eventually it all needs to be paid back to the lenders, a bumpy road for sure when you’re overwhelmed by credit card debt on multiple accounts.
• Agreeing to Debt Consolidation while Continuing to Use Credit: This strategy will backfire, as you will basically be standing still while incorporating a plan that would normally help lower debt. Consolidating all your debt into one account can be a great way to dig your way out of debt, but not if you keep using your available credit.

Personal reasons unrelated to finance that may be triggers to future financial problems, include a lack of or insufficient insurance coverage on your health, car and home. Disputes and disagreements between couples about money are the most common relationship problem. Sometimes one partner lies or hides the truth about how they’re spending the couple’s money. Issues like these need to be addressed and worked on until a joint agreement has been reached.

By keeping alert to the warning signs of poor financial management and correcting your course when one crops up will free up funds to invest in college for the kids or to pad your investments set aside to secure a carefree financial future for your retirement years.

Identifying the warning signs is the first step; the second is equally important. You need to take action to resolve the issues to protect your financial integrity and future in the best interest of yourself and your loved ones.

About The Author: Noreen Ruth is a staff writer for www.asapcreditcard.com, a site that provides credit tips, news, credit card comparisons and reviews. She is interested in educating consumers about using credit responsibly and taking actions that will affect their ability to borrow the money they may need in the future.