DANGEROUS CURVE: How to spot financial trouble down the road

Posted By: Matt in Credit on 04/14/2014 at 08:01:25

The old cliché "knowing is half the battle" seems antiquated and outdated, something you'd hear on a G.I. Joe Saturday morning cartoon or a tremendously campy public service announcement of sorts.

But within that overused saying is an abundance of truth, especially when considering your budget and whether you should be concerned moving forward.

More often than not, the general consumer is plodding along, paying bills, working and managing their finances but is completely oblivious that they're headed down a path of financial ruin. Perhaps those people refuse to believe that their spending habits are harmful or assume that they've been adhering to this routine for so long that it simply should be viewed as commonplace.

But before long, they'll be in the midst of mind numbing debt and scrambling to end their struggles relatively soon. Before it gets to that point, you must be incredibly mindful of signs, both minute and obvious, that a change is needed sooner than later.

For starters, how does your savings account look· Or, furthermore, do you even have one· If the answer to the latter question is "no," then that is cause for concern. If you have a savings account and the balance could barely fill a piggy bank, that's not much better.

Not having a bit of a nest egg is putting you in a position to be incapable financially of handling a spur of the moment life event. If your roof starts leaking or a major car repair is on the horizon, you have no choice but to head to your credit cards as your last, and only, option.

And speaking of credit cards, ask yourself this question: how are you using the ones you have·

Credit cards theoretically are ideal for emergencies in conjunction with not having the money on hand to fix or repair the situation. If you find yourself using credit cards for day to day spending, that's a huge red flag that change is in order.

That means ditching the MasterCard at the grocery store or whipping out the Discover Card for that daily trip to Starbucks or to suffice as payment for lunch. Those incidental expenses should be cash only (or debit card) purchases without question.

Do you really want to spend 16% interest on celery or a pack of mints·

Probably not, nor do you want to extend those monthly payments any more than you already are committed to paying.

What's really alarming aside from the actual usage of credit cards are those consumers that don't really know how much debt they have. They're so entrenched in making that monthly payment that they truly don't understand how much they've amassed over the years.

Once again, the power of truly knowing your financial standing when it comes to debt and the direction you're headed proves to be the ultimate factor in climbing out of this mess.

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