In today’s world, many people are facing various financial issues that are the result of bad financial habits. The struggle of fulfilling financial needs and obligations such as loans, bills, expenses, family, and retirement in an imbalanced way leads to situations that spell doom for their savings.
Be it an individual or a small-scale business, a financial crisis doesn’t arise overnight. There are many warning signs that if continuously ignored lead into bankruptcy or foreclosure. If you don’t want to lose all your wealth because of your bad financial decisions and habits, then here are 4 warning signs that you should look out for.
Savings are extremely important to cover emergency situations. Some people save in their savings account while others prefer to have a separate emergency account. This saved money is of great help when something unexpected happens such as medical emergencies, automobile repair or loss of a job. Lack of a savings or emergency fund is like walking in a rainy weather without an umbrella. If you don’t have at least three months of your living expenses in your emergency fund, then you’re surely in trouble.
If your minimum monthly credit card payment is more than $100, then you’re spending more money than you’re supposed to. A credit card is a helpful means of payment but can affect your spending habits if not balanced well. Pay off your full balance each month to avoid your credit card debt from getting bigger.
Taking a loan to pay off other loans or bills shows that you’re in a big trouble already. This means you’re unable to manage your finances to pay the minimum due each month. It’s a cycle that will land you in the financial crisis when you’ll be unable to keep up. This strategy may seem convenient but it adds to your debt load and affects your credit score, thus making you a defaulter in the eyes of the lenders.
Regular payments of overdraft charges, bank fees, late payment charges on credit cards, or out-of-network ATM fees are all red flags that you need to take your finances seriously. These unnecessary fees are due to the lack of enough cash in hand which is a serious threat to your financial health. It can be avoided if you organise your finances and keep a check on your bank accounts and spending habits.
These warning signs show that you’re moving towards big financial trouble. If you’ve noticed these red flags, then it’s high time to act. Start saving today, monitor your expenses and stop spending unnecessarily. If you’re an entrepreneur, then hire a bookkeeper to manage your accounts so that you don’t have to face the consequences of these financial instabilities.
The Virtuous Bookkeeping explores ways for entrepreneurs to enjoy independence and better run their business. Join over 10,000 subscribers and get our best articles delivered via email.