Warning Signs

Several Early Warning Signs of Financial Problems

When people have problems with money, they often don’t do anything about it until they cannot afford to make their monthly payments, their house is foreclosed on, or a vehicle is repossessed. People often live in financial denial, living far above their means and spending much more than they make. Only when they hit bottom do they do anything to rectify the situation. It’s strange that so many people have to wait until they are at the worst place they could possibly be financially before they make a course correction. Early warning signs are always visible, yet people don’t do anything about them. If you are exhibiting any of these early warning signs of financial trouble, you should make financial changes which will put you back on the right track.

A lot of people who are not very good with money learn financial habits from their parents without even realizing it. Look back at your childhood and remember what your parents did when it came to money. If you can see any mistakes that they made, chances are you’ve made one very similar.

One very common mistake that people make is when a massive windfall amount of money comes in through something like a tax return, lottery ticket, or inheritance, they spend it very wrong. They use the money to buy extravagant things they don’t need, such as a big screen television of some expensive jewelry. Instead this money could have gone to reduce debt, or save for retirement.

A lot of these behaviors are things that normal people would do, but in the world today, normal is broke! A lot of people believe that when they get money, they should spend it on something that will provide happiness immediately, such as fast food, or a new video game. Having this mindset will cause you to overspend and not save nearly enough money.

If you have never had an opportunity to manage any sort of money until your late teens, you didn’t receive much in financial training from your parents. You are behind and need to catch-up. I suggest reading some basic personal finance books such as The Richest Man in Babylon and Financial Peace Revisited to learn some basic principles about personal finance.

Finally, look at your out go. If you are spending a lot of money on fast food, movies, and other “wants” and not saving very much money, this is a major warning sign for financial problems in the future. You should always save some portion of your income. Keep your expenses in check so that you have money when you need it.