Money can be a tricky thing, especially because working around it requires a lot of groundwork and research. For many of us, we haven’t had the opportunity to be part of financial classes or reading books on finance. This makes it much easier to fumble the bag, literally.
What I have come to learn is that the world today offers us a universe of information where we can learn. We literally have no excuse, with all the knowledge and direction out there. Be careful though, and always make sure that you are absorbing credible information. Be Careful Where You Get Your Financial Information – There Is A Lot Of Fool’s Gold Out There Masquerading As The Real Thing
When you experience a financial disaster, your financial situation spirals out of your control. In a financial crisis, you find yourself in an unsustainable financial lifestyle, whereby your debt far outweighs your income and so you stand to lose assets.
Here are 7 signs that you are headed for a financial disaster.
1. You are continuously unable to pay your bills on time
Bills are an inevitable part of life. To survive, you need essential services such as water and a place to live. Then there are wants and luxuries like internet access. If you find that you are continuously unable to pay these and other bills on time, then you may be headed for a financial disaster.
When you miss payments, several things may happen. For one, you may be cut off from these essential services. Missing a payment is a big problem because it will kill your credit score. Additionally, after several missed mortgage payments, some lenders will start foreclosure proceedings.
2. You are spending more than you earn
If you spend more money than you’re earning, then this is definitely not a good sign. Why? Because first, it is an indication that you are handling way too much liquid money. Secondly, it means that in the long run, you can squeeze your accounts dry.
Some people try to avoid this reality by adding their debts to their mortgage, car loan, or line of credit. Unfortunately, this will only help you if you solve the problem that got you into debt in the first place. You have to make some changes in your budget so that you will spend less than you make. Otherwise, you are only delaying the inevitable.
3. You have no savings
Everybody needs savings. Whether it’s for an emergency fund or a sinking fund, there is no doubt about this. If you find that you have no savings at all, your finances are definitely headed for trouble. 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 the loss of a job and you’re in dire straits. Savings is a better financial cushion than credit.
4. You’re dipping into your investments or retirement fund
If you find that to survive you need to dip into your investments and assets, then you are definitely headed for financial trouble. Why? Because just how deep down these pockets can you dig before they become completely empty? Stealing from your future is a good sign that the present is shaky.
5. You are borrowing to pay your bills
If you are borrowing money to pay your bills, then first, you are spending more than you earn. This is a sign that you need to do two things. First, you need to increase your streams of income, and second, you need to reduce your expenses.
It may have started quite innocently with a consolidation loan or a balance transfer to a lower interest credit card. But now your good intentions have taken on a dangerous life of their own as you still struggle to make ends meet. Stop the cycle as soon as possible and find a way to balance your expenses with your income.
6. Relying on a one-time financial event
If you find that you are waiting for a one-time financial event, such as inheritance, a big tax return or winning the lottery, then you are definitely headed for trouble. It’s important to arrange your finances so that your situation is under control without the need for periodic injections of extra income just to get by.
7. Taking cash advances on your credit card
It seems like an easy and quick way to get money, but taking cash advances on your credit card is a bad idea, in every sense. First, cash advances on your credit card usually come with a hefty transaction fee. Second, cash advances are usually subject to significantly higher interest rates than ordinary credit card transactions and are not included in interest-free periods. 7 Pros And Cons Of Using A Credit Card