6 Signs Indicating You Are Headed for a Financial Collision

This article published with permission from

.

Getting into trouble financially doesn't happen all of a sudden. It happens little by little, dollar by dollar, as you increase the amount you owe on your credit cards. An emergency comes along and your savings doesn't cover the bill so you use your credit card like a piggy bank. You don't mean for it to happen, but you are forced into a corner.

Being aware of the warning signs of trouble may help you avoid it; so here are six indicators that you may be on your way to financial ruin.

1. Using your home as a source of money. One of the causes of the financial crisis was homeowners borrowing on the equity in their home. They used the money for consumables like TVs, cars and vacations. Some used their home to pay off credit card and other debt. Doing this takes short-term debt and makes it long-term debt. It’s like borrowing money for a car and taking 30 years to pay it off. It’s better to just find another way to borrow the money for your debts. Try negotiating a lower interest rate with your credit card company.

2. Using or borrowing from retirement accounts. If you borrowed from your 401(k) this is a sign of future financial problems. Most people use this as a last resort and it shows that you are having trouble with cash flow. It is only a patch on a problem. Doing this just exposes the serious financial problem you have. Using your retirement savings sets up future tax problems, you have to pay the loan back if you lose your job, and you lose the compounding that makes retirement savings grow. A better way would be to cut back in lifestyle and sell everything that's not nailed down.

3. You’re paying overdraft fees and getting non-sufficient funds notices from your bank. This is a big red flag that you have too little income and too many debts to pay. Your monthly bills are more than you make and just one more emergency will put you underwater. Now is the time to seek professional credit counseling.

4. Fighting with your spouse about money. Nothing can end a relationship faster than money problems. An occasional fight now and then is fine, but if you are having continual, never-ending fights you are showing all the signs of an impending financial disaster. It's time to get to both a marriage and a financial counselor.

5. Credit card roulette. If you are juggling several credit card balance transfer offers and just moving balances from one to another card, this is a sign of impending financial trouble. You are not paying down your debts, and you may be just increasing them. Here again a drastic reduction in lifestyle is the answer. You’re spending more than you make and it will never end unless you do something drastic and change your behavior.

6. Paying late fees and juggling due dates. Timing your bills’ due dates shows you just don't have the money for what you’re spending money on. It's very hard to time your bills’ due dates. You may get some bills there on time but others, like credit card companies, sometimes hold back your payments and credit your account after due dates just to churn late fees. Late fees also trigger interest rate increases, just making your minimum payments even higher.

If you’re tired of living with these kinds of behaviors and never having enough money to pay your bills, maybe you’re sick and tired enough to do something about it today.

David Leto is a personal finance blogger at

.

50plusfinance.com50plusfinance.com