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Do you make a decent salary but you're basically broke at the end of every month? Is it as if your money is just pulling a disappearing act? This is not an uncommon feeling. A lot of people just won't take a good close look at their spending habits as this can create feelings of remorse, shame, guilt or frustration. The solution is a simple one. You must track your spending for maybe a month or two so that you can see where your money goes, which will help you then prioritize your spending, save more money, pay down your debt faster and actually achieve your financial goals.
Sign 2: There are months when you can't pay your credit card bill
Credit cards can be useful tools because they allow you to time shift your spending just as you would use your DVR to time shift your favorite programs. And if you use them sensibly you can earn some pretty nice rewards. The problem is that if you don't use them sensibly it becomes much too easy to fall into debt hell. For whatever it's worth, you're not alone if you're not using your credit cards responsibly. In fact, American households now owe more than $15,000 in credit card debt. This may not be true of you but if there are months when you can't pay off your credit card bill(s) because you’re using them for impulse purchases this is a warning sign that there is trouble ahead.
The way you fix this is by learning to use those credit cards responsibly instead of as a source of free money. Don't make any purchase, whether it's a $40 dinner or a $1000 vacation, unless you actually have enough money to pay your statement when it arrives.
Having a problem using your credit cards responsibly? Here's a short video that should help you at least avoid impulse purchases.
Sign 3: You buy things by cutting back on the necessities
Will you be eating instant Ramen all week because you just had to splurge on a new ultra HDTV or you just couldn't resist a weekend at the beach? If you find your having a hard time covering the basics because of what you spend on eating out, travel and other "nice to have things" then you’ve lost track of your priorities. The way to fix this is by developing a budget and sticking to it. You'll first need to list all of your essential expenses such as housing, food, utilities, insurance, savings and transportation. Whatever you have left over after you’ve budgeted for these items is your fun or discretionary spending – whether it's that weekend at the beach, dinner at a four-star restaurant or new clothes. Believe it or not but following this advice will soon have you enjoying some of the finer things in life while still being responsible financially.
Sign 4: You don't always pay your bills on time
According to a survey done by the personal finance website NerdWallet approximately 25% of us don’t always pay our bills on time. This survey also found that some of us are juggling our bills to make ends meet, such as paying our rent on time while putting off paying our Internet bill until the next payday. Of course, other people are simply disorganized. The problem is that this costs you in the form of late fees and very likely a lower credit score. The harsh truth is that if you can’t get organized enough to write a rent check on time or make your student loan debt payment when it’s due, the odds are good that you’re failing to do a good job of managing other areas of your personal finances.
Sign 5: You overdraw your bank account occasionally
When does a $3 your cup of coffee at Starbucks actually cost $40? It's when you overdraw your checking account and get hit with a fee. You may not know this but the average bank overdraft charge is $33. Purchases of less than $24 account for most of these fees and the banks rake in a tidy $11 billion every year on them. In fact, if you do the math you'll find that an overdraft charge is about the same as a loan with an APR of 17,000%. You can fix this by contacting your bank and turning off overdraft protection. This may cause your card to be declined when you try to make a purchase but this little bit of embarrassment is a lot better than getting hit with an overdraft charge. You should also go online and check your balance before you make that purchase so that you'll know if you have enough money in your account to cover it before you swipe.