Warning Signs that Your Personal Budget is in Trouble
The economy may be in recovery, but millions of Americans are still struggling with their personal finances. In fact, a Bankrate.com study from 2013 found that a staggering three-quarters of Americans live paycheck-to-paycheck and have little or nothing in the way of emergency savings.
Most people have great intentions for their personal budget, but it is very easy to slip up and fall behind financially. If you know the signs your finances are in trouble (or close to being in trouble), you'll have an easier time getting your personal budget back on track. Have a look at these signs your finances are suffering. If you find yourself in any of these situations, it's time to take steps like making a budget and cutting spending before things get worse.
Not Paying Bills on Time
Everyone has simply forgotten to pay a bill occasionally, and many utility companies and other service providers will waive a late fee if you have a good payment record and it's obvious you simply slipped up. However, if you frequently pay bills late, you harm your credit record, end up throwing away money on late fees, and risk having vital services cut off.
Struggling to Meet Minimum Payments
This is a huge red flag. If you have a hard time making even the minimum payments on revolving credit accounts, it may be time to freeze your credit cards. You simply can't keep using credit cards and hope you'll somehow be able to service your debt responsibly when even minimum payments are out of your reach.
Paying for Necessities with Credit Cards
Some people pay for necessities with credit cards to earn rewards from their card issuer. There's nothing wrong with this if you pay your balance off every month and avoid accruing interest. However, if you're buying necessities with credit cards because it's your only option, it's time to make a personal budget that helps you climb out of this hole.
Taking Out Expensive, Risky Credit
If you need cash and have to take out a payday loan or a cash advance on a credit card, it's time for some serious budgeting. Cash advances on credit cards often carry much higher interest rates than your normal credit card interest rate, and they don't fall under the 0% "teaser" interest rate some cards give you the first few months.
Being Turned Down for Credit or Having to Have a Co-Signer
Getting your credit in shape starts with having a personal budget and paying off existing debt. Unless there is a major error in your credit reports (which you can access free once a year to check for errors), being turned down for credit is a sign your finances are in trouble and you need to take action.
Juggling Bills Each Month
Juggling bills to avoid having services cut off is another major warning sign that your personal budget is in trouble. Getting all accounts paid up should be your top priority, because repeatedly falling behind on bills hurts your credit and drains your income even further due to late fees and charges for reestablishing service if you're cut off.
Counting on Windfalls to Stay Afloat Financially
Counting on a tax refund, an inheritance, a work bonus, or a generous cash gift for a holiday or birthday indicates that your personal budget is out of control. Windfalls should be just that: something extra. If you consistently use little windfalls to buy things you don't need or to make accounts current, you could be seriously jeopardizing your long term financial health.
Interpersonal Problems Related to Spending
Hiding spending from a partner, avoiding the topic of finances with your family, or experiencing frequent worry or stress related to finances are signs that changes are overdue. It's not easy to bring up the subject of financial difficulties with your spouse, but avoiding the subject can damage your relationship as well as your finances.
Not Having Any Savings
Many people know they need three to six months' worth of cash stashed in the bank, but figure they'll never be able to have that, and therefore make no effort to save. But having a little money set aside is much better than nothing. Saving should be regular and if possible automatic through direct deposit.
Having a personal budget doesn't mean a life of drudgery and never enjoying anything. On the contrary, a personal budget is the first step to making the most of your money and making it serve you, rather than the other way around.