Financial trouble rarely happens overnight. Often, there are warning signs — sometimes weeks or months before things get serious.
“If you’re finding that you don’t have enough money between paychecks, you’re running short, your account is overdrawn, you’re having to borrow money, you’re having to use your credit card basically for everyday expenses, that could be a red flag,” said Neighbors Federal Credit Union’s Financial Wellness Director Kim Chapman.
When your paycheck isn’t making it to the next payday, credit cards can quickly become a lifeline.
But that convenience can come at a cost.
Chapman says if you’re charging everyday expenses and can’t pay the balance in full, interest can quickly add to what you owe. Another warning sign can be even easier to spot, late payments.
“Late payments should be a screaming red flag. If you find yourself not able to meet your obligations and pay your debt on time, if you’re paying things late, that is a red flag,” Chapman explained.
Chapman says financial trouble can also be seasonal. A tax refund, bonus or raise can make it feel like there’s more room in the budget, which can lead to more spending. Then come the holidays, when that spending can really add up.
“We get a little bit more money, we get a raise, and so then we’re spending, spending, spending, and then the holidays just become the icing on the cake because then sometimes, if we don’t do that budget first, we go a little crazy and we buy what we’re used to having and not necessarily what our what our budget allows for,” Chapman explained.
The best way to avoid the financial warning signs is to have a plan before they appear.
- Build a realistic budget
- Stick to your budget
- Avoid putting more on a credit card than you can afford to pay back
- Keep balances as low as possible
- Make your payments on time to avoid late fees and added interest
If you’re already seeing some of those red flags, don’t ignore them. The earlier you make changes, the easier it can be to get your finances back on track.
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