11 Signs You’re Struggling Financially — and 3 Ways To Get Back on Track
According to data from Payroll.org, reported by Forbes, 78% of Americans live from check to check, but you don’t have to exist one pay period away from catastrophe to struggle financially.
You do, however, need to know the warning signs.
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Some indications of impending monetary peril are glaring and obvious — many among the struggling 78% probably experience them every day. But other signs are more subtle, offering less conspicuous warnings that money trouble is brewing.
If you notice either, take note and take action.
The Big 7: These Signs Indicate Serious Financial Dysfunction
Laura Adams, MBA, award-winning personal finance expert with Finder, outlined the seven most important “warning signs that you need to get your finances under control sooner rather than later.”
All seven indicate urgent and potentially disastrous money trouble, so take it seriously if even one applies to you:
You have too much debt relative to your income.
You don’t know how much debt you owe.
You pay only the minimum on your credit cards.
Your credit cards are maxed out.
You’ve been turned down for a new loan or credit account.
You don’t have emergency savings.
You lie about your finances.
All seven of these signs wave big, bright red flags, but other indicators of serious financial trouble are more subtle and easier to ignore.
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You Stop Giving to Charity
Philanthropic giving is often the first thing to go when households face tough times.
“As a finance expert, I’ve observed that a subtle sign of financial struggle is a reduction in charitable donations,” said financial author and speaker Alan Beard, managing director and CEO of financial advisory firm Interlink Capital Strategies and adjunct professor of international business and finance at Georgetown University.
“It’s not always obvious, but when individuals who were once regular donors start cutting back on their charitable giving, it can be a telling indicator,” Beard said. “This change suggests a shift in their financial priorities. Rather than being a conscious choice, it often reflects their struggle to balance their own financial needs. While it’s important to support charitable causes, it’s equally vital for individuals to ensure their own financial stability before extending a helping hand.”
You Hide From Unopened Bills and Unread Statements
People with a firm grasp on healthy household finances don’t behave like ostriches with their heads in the sand. But when your money situation is spiraling out of control, the simple act of facing it all can be too much to bear.
“Another less obvious sign is the avoidance of opening financial statements,” Beard said. “I’ve noticed that individuals facing financial stress may consistently bypass their bank statements, credit card bills or investment account summaries. This behavior can be driven by a desire to avoid confronting their financial situation. It’s a form of denial, as they may fear the reality of their financial challenges. However, facing the facts is the first step in addressing and improving their financial situation.”
You Take Out Small but Frequent Off-the-Books Loans
According to Beard, quietly and commonly borrowing small amounts of money from friends, family or co-workers is another sign that you’re teetering on the edge of a financial cliff.
“While these loans may not be substantial individually, their frequency is telling,” he said. “It signifies ongoing financial challenges that push individuals to seek financial help from their social circles. It’s often a silent cry for assistance and highlights the need for more comprehensive financial stability.”
More Than Half Your Income Goes to Fixed Expenses
According to MIT Student Financial Services, one variation of the famous 50/30/20 budget plan allocates 20% of your income to financial goals, 30% to flexible spending and no more than 50% to fixed expenses.
Whether you follow that plan or not, anything more than half is a red flag.
“When people’s fixed expenses take up a large percentage of their budget, like 60%-70%, financial disaster is just a few emergencies away,” said financial coach Jillian Johnsrud, author of “Retire Often,” to be published by Harriman House. “There isn’t enough margin for the car if you need new tires, a new water heater or a vet bill. If people can reduce their fixed expenses by paying off debt or canceling memberships, there will be wiggle room to avoid going deeper into credit card debt.”
Does Any of This Sound Familiar? Here’s How To Right the Ship
If any of the warning signs you’ve just read about ring a bell, don’t panic and don’t beat yourself up — just concentrate on what comes next.
“Despite great intentions, it can be difficult to stay on track with your budget,” said Nicole Sanchez, a financial health expert at Chase Bank. “Here are a few tips to consider that will help you get back on track.”
Evaluate Your Spending and Adjust Your Budget Accordingly
Sanchez said step one is to analyze your spending and identify opportunities to improve.
“For example, cut out unused subscriptions or reduce the number of times you go out with friends to dinner, movies or for coffee every week,” she said. “Sometimes, you may need to create a new weekly or monthly budget. This gives you the chance to consider your current expenses and account for new ones — such as a new car, mortgage or medical payments — that may be causing you to go over budget.”
Spend and Save Mindfully
The second step is to identify your essential versus non-essential expenses and allocated your income accordingly.
“While it’s important to enjoy life, it’s also essential to be mindful of your daily spending habits,” Sanchez said. “Making small sacrifices here and there can help you save and spend smartly but also allow you to enjoy family vacations, friend trips, concerts, etc.”
Establish an Emergency Fund
An emergency fund is the foundation of sound financial health because, without one, you’ll have to take on debt to manage unforeseen expenses.
“Understanding the need for an emergency fund and the steps to take to build one can help you through any life moment, such as unexpected medical, car or vacation expenses,” Sanchez said. “By saving regularly, no matter the frequency or amount, you’ll have the financial flexibility to help take on your goals. Some savings goals may require more time and money, but you can get there with the right plan.”
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This article originally appeared on GOBankingRates.com: 11 Signs You’re Struggling Financially — and 3 Ways To Get Back on Track
