Financial trouble seems to follow people around with anything that they do. Regardless how much you prepare for them, it always finds a way to pop up in your life. The hard part is that it usually happens when you least expect it. Just when you think you have everything figured out, life throws a curveball at you.
When you talk about financial trouble, debt is usually not too far behind. Though debt is not necessarily a bad thing, the problem starts when you start missing your payments. Trouble can also creep up when you fail to plan for your financial needs in the future. One perfect example is your retirement fund.
You could be digging yourself into a deep hole and forcing your future self to work extra years simply because you do not have any retirement plans at present. This can be a potent source of stress as well. According to Federalreserve.gov, about 76 million American adults are financially struggling to a certain degree causing financial stress and this can include retirement planning.
Before you even experience these financial challenges or to prepare you for any impact it carries, here are a few warning signs to look out for. These can serve as flashing red lights that lets you know financial trouble is brewing up ahead.
You do not have a budget
There are a lot of people who put off their plans of starting a family because of financial hindrances. This only highlights the importance of having a grip on your finances and it all starts with your budget. The household budget serves as your financial blueprint in helping you oversee the movement of your income as well as expenses.
The lack of an even simple household budget is a clear sign that you are headed down trouble. One thing that could be stopping you from putting together a budget is thinking you need a complicated spreadsheet where in fact you need to start simple. Start by jotting down your income and expense. See if you have enough funds to cover expenses and start adjusting and adding to your list as they come.
You do not know where you spend your money
Have you ever found yourself wondering where your last month’s paycheck went as you look at an empty bank account? You try to mentally work your way backward and trace your spending to pinpoint how exactly you spent your money. If this is a common scenario for you then you are headed down a path to sure financial debt.
The best remedy for this is to make the most out of your budget. In particular, your expense list. It is best to list down all your expenses for the next few days down to the smallest purchase. As you do this, you get to see where your money is going and make adjustments as you go along. You identify where you can make changes so you can lower down expenses and avoid financial trouble by having ample wiggle room with your funds.
You are living paycheck to paycheck
Washingtonexaminer.com shared that about half of families in the country knows how it is to live from one paycheck to another. This is again a clear sign that financial trouble is up ahead. This is because you are one sickness away from missing a payment or one impulse purchase away from missing a meal.
There are a few things that can help you address this concern. One is looking for a way to increase or supplement your income. The other is lower down your expenses. Independently, they can help you free up some funds in your budget. However, when combined together, they can give your finances a great boost.
You do not know the first thing about investing
The ability to be proactive with your finances goes a long way in securing a strong financial disposition in life. With that being said, one of the things you need to learn about to accomplish a dependable financial outlook is investments. If at this point, you know nothing about how it works and how it can help you grow your net worth then you need to putting some focus into it.
Investments are simply growing your money over time. Choosing what instrument to use is tricky. However, the one thing you need to understand before you get started is your risk tolerance. When it comes to investments, the riskier it is, the higher the potential gain. Adversely so, the safer it is, the lower the possible return. You need to find your comfort level to get started. But do not forget to make adjustments as you go along.
Your retirement fund is non-existent
When you start talking about financial trouble, you should not only be concerned with your present needs. You need to take a look at what you need to do for your future as well and one of those would be your retirement fund. One clear sign that you are headed down financial trouble in the future is if you are not saving for your retirement now.
The best way to get started is to look at your 401(k) and get started. The good thing about this is that your contribution is automatically taken out even before you get to use it. Meaning, rather than spending the money on wants, you are forcing yourself to save for your future. It also makes budgeting a lot easier as you are left with actual money you can use for groceries and other needs.
You are barely making minimum payments
Financial trouble is coming if you seem to be making only the minimum payments on your bills. There are some people who would be quick to point out that minimum payments kill your finances. The problem starts if you are forced to do it because you simply do not have enough. You might have overstretched your budget rendering you unable to make extra payments.
If you encounter a slight hitch like a late credit to your payments or you suddenly have to get something repaired, you know start to move payments around. There is a big chance that you would send out a late payment for one or worse, completely miss a bill. This would result in penalties and fees which will increase your next month’s payments.
Not having financial goals can lead to financial trouble
Much like how a ship would sail endlessly out in sea because there is no plotted course, you run the risk of ending up in the same boat. If you do not have any financial goals in life, you do not have any sense of urgency and would not really exert much effort in just about anything. The problem with this is you go where life takes you.
What if life takes someplace you really do not like? How can you get out? What if you wake up one day with so much debt under your name? There are repayment programs such as debt consolidation loans that can assist you in making payments a lot easier. However, you need to understand that not having any financial goals is a clear sign that you could be headed down some financial challenges in the near future.
You are not building up your reserve funds
It is troubling to find out that according to Homeserveusa.com, about one in four consumers do not have any emergency fund for simple home repairs. What would happen if it was a medical emergency? Or if you are shown the door at work? If a child gets sick? The only thing you can do is to take on debt to fund your need.
If you are not saving for any type of reserve funds, you are surely headed down financial trouble. This is because, in life, emergencies like these and a lot of others is not a question of “if” but more of “when”. What further complicates this situation is you never know when it will come. The best thing to do is to prepare for it.
Financial troubles will always be part of life however, there are warning signs that you can look into to help you prepare for them.