Let’s face it, in a perfect world you would never be broke, your bills would always be paid on time and you would have money left over from your budget every month. Most of us however end up juggling our financial obligations, like retirement, monthly bills, student loans, mortgages and so forth, and usually carry quite a bit of debt on credit cards too. Getting out of debt is not easy.
That being said, the average consumer still manages to get by. However, if you’re experiencing any of these next 4 danger signs, it might be time to stop and reconsider the way you handle your finances and, if possible, make a complete overhaul of same. The last thing you want to do is wait until the problems get so completely out of control that bankruptcy (or worse) is your only option.
1) You don’t have an emergency savings fund
This is more important than most people realize, especially those who are living “paycheck to paycheck”. Without a cushion of liquid assets to get you through in case of emergency, like a major repair for your automobile, a trip to the emergency room or getting laid off from your job, you could go from out of the pan and into the fire, financially speaking, instantly. The fact that you’re not alone might help you sleep a teeny bit better at night, but having at least enough money to cover you for 6 to 12 months of living expenses will help you sleep much better.
2) You are considering taking out a “payday loan”
Here’s the thing about payday loans; imagine a lion and a wildebeest. You are the wildebeest and the payday loan company is the lion. In other words, you are the prey and they are the predator. Payday loans are notorious for having interest rates that, in a word, are insane. We’re talking upwards of 400 to 500%, which makes it easy to understand how come so many people who take payday loans out have trouble paying them back. In comparison, the 30% that you will pay for interest on credit cards seems paltry.
3) You are only paying the minimum on your credit card bills
Let’s quickly put this into perspective. Let’s say you have $1000 in credit card debt, with an 18% interest rate annually. If you pay the minimum every month (which is typically interest and 1% of your balance) it would take you almost 10 years to pay off that $1000 and, by the time it’s paid, you’ll have also paid $923 in interest fees, meaning that you’ve paid nearly twice the amount of money you initially paid. (Hope that coffee machine was worth it.
4) You aren’t saving anything for retirement
Very few people work until the day they die. What that means is that, at some point in your life, that weekly paycheck you are getting will stop. Sure, Social Security will send you some money (if it’s still around) but, if you don’t have anything saved for retirement, you’re going to have to either be very lucky or rely on the kindness of strangers to get you through. (If you have end up getting a debilitating illness you could be even worse off.)
Yes, we know that this blog wasn’t very uplifting but, frankly, sometimes it’s good to get slapped in the face (figuratively speaking, of course) so that you change your habits and get back on course, financially. Hopefully today’s blog has done just that.