All too often, people don’t notice that they are well on their way towards a financial disaster until it’s too late. Personal finance planning is a topic that is simply not taught at an appropriate age, and young adults are expected to navigate their own way with their money without any counsel or advice. This leads to poor financial habits and lack of finance planning that slowly but slowly spiral into a full-blown financial disaster by which time it might simply be too late.
Here are some signs that you too might be making your way towards a financial disaster in the near future.
1. You never have any money in hand
No one ever really has enough money to do everything they want to do in life. But if you find yourself never having any money in hand to do absolutely anything at all, this clearly indicates that you have serious money troubles, even though you might be making enough money. It’s time to take a good look at your finance planning (or lack thereof) and maybe rethink some of your expenses.
2. You spend more than you earn
If you are constantly living beyond your means each month, this indicates extremely poor finance planning. While you might have been able to make it work all these days, there will come a day when it will bite you back. Furthermore, it’s a very dangerous habit to fall into and exercising some self control will greatly come in handy.
3. You don’t know how much you have in your account
The only thing worse than spending more than you earn is not knowing how much you spend. If you are not tracking your income and expenses, and constantly checking up on your bank balances, you might be losing a lot of money in various ways you wouldn’t even dream of. Unauthorised bank fees, subscriptions and mistaken charges might be eating away at your bank balance. Not accounting for your money indicates poor finance planning.
4. You only make minimum payments on your credit card
Credit card debt is one of the easiest pitfalls you would not even know that you are falling into. Making only the minimum payments on your card means that your debt is exponentially growing each month. Ideally, you should never be using your credit card in place of your debit card, and if you do, you must ensure that you pay off the bill in full each month. Don’t get fooled by the very low minimum payment required - the bulk of the bill remains. The longer you neglect it, the worse it will become. If you have fallen into the habit of simply paying off the minimum amount, this indicates lack of finance planning and is a sure way of drowning in debt.
5. You frequently borrow money to pay bills or basic living expenses
If you need to borrow money from others to pay your utility bills and fixed monthly costs, this indicates that you are already very close to financial disaster. If you are covering your basic living expenses through debt, it begs the question of what exactly you are spending your money on. Lack of finance planning has brought you here but with some analysis of your spending habits and reducing expenses, this can be averted.
6. No savings or emergency fund
If you are able to live comfortably, but have very poor savings and/or an emergency fund, this is a very dangerous situation to be in. One unexpected medical crisis or household expense could completely turn your world upside down and throw you into debt. It’s high time to start building up your savings and emergency fund.
If personal finance planning is something you’ve never considered before, know that you are not alone. Finance planning does not come naturally to anyone and is not included in primary, secondary or tertiary education. If the above signs indicate that you are close to a financial disaster, don’t worry - it’s not too late to practice some smart finance planning and get back on track.