There’s a point in your life that you will find trouble in your finances, however before these problems surface there would have being some red flags that will surface before everything goes haywire.
If you are lucky to identify the red flags (warning) when they show face, you may be able to reverse it or do something about it before it’s too late. Below are warning signs that denote you are in a lot of trouble;
1. You keep Dipping Into Your Savings
If you repeatedly dip into your long-term savings to make ends meet or pay for unexpected expenses, you may not have enough liquidity to truly weather a financial emergency.
You should have saved at least three to six months of living expenses in an emergency fund, to cover you in the event of a job loss or unexpected expense (like a medical emergency). But if you keep tapping into your emergency fund for every unbudgeted expense, or if you find yourself reaching into other savings accounts, it could be a sign that your finances are in trouble. For example, your income may not be high enough to meet your expenses, or you may be spending too much money on housing.
2. You Regularly Pay Bank Fees
If you find yourself frequently paying for unnecessary bank fees, such as out-of-network ATM fees, overdraft charges, or late fees on your credit cards, your finances could be so disorganized they are threatening your financial health. For example, if you’re forgetting to pay bills on time or are using credit card cash advances or out-of-network ATMs because you failed to keep enough cash on hand, it could mean you are so out of touch with the state of your finances you wouldn’t even notice if they were ailing.
3. Your Retirement Account is Hardly Growing
If you invest intelligently and contribute regularly to your account, your retirement account should grow significantly every year.
But if the numbers on your financial statements are hardly budging, that’s a surefire sign that your investment strategy needs to be rehabilitated — or that you’re failing to contribute adequately to your accounts.
4. Your Income Isn’t Growing
Not only should your savings be growing every year, the total amount you take in should also be expanding. If your income is holding relatively still, it could be a sign you aren’t performing as well in your career or are taking too few risks. For example, if you stay at the same company for years, you might get modest yearly raises; but you could potentially make more money if you jump to another company or work for yourself. And remember: If your salary doesn’t at least keep pace with inflation, then your effective salary is actually shrinking