Many people I speak with feel their finances are in good shape when they are actually on the road to some serious financial issues. Below are some things that many people consider “Normal” but could indicate the start of financial troubles:
- You carry credit card debt month to month — Carrying credit card debt means that you have spent more than you earned and did not have any emergency reserves.
- When thinking about major purchases you focus on the monthly payment vs. the total cost. Car dealers love buyers like you! They can almost always come up with an acceptable payment for you by stretching out your payment period to 7 or even 8 years while charging you a very high rate of interest! Or there may be another “gotcha” like a balloon payment at the end of the loan.
- You don’t have a reasonable idea of what you spend every month. People who don’t have an idea of what they are spending are often spending more than they are taking in and slowing going into debt. They would prefer not to think about the issue and put off the day of reckoning as long as possible
- You don’t pay yourself first. The most successful savers I’ve met have always made themselves their top financial priority. The first money they earn goes into savings/investing. What is left over is what they have to live on. These savers realized that by sacrificing some immediately gratification today, they will be able to provide for their future. They also pass along great financial discipline to their children, who learn most of their financial management skills by watching what their parents do (not what they say).
If you see yourself doing any of these “Normal” things take a good look at your finances. It’s much better to nip an emerging problem in the bud, than to dig yourself in a big hole that will be difficult to get out of.