Nine Signs of Financial Trouble Ahead

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    It's not uncommon to worry about money. Over 60 percent of all people report being anxious about their finances, up from 28 percent in September of last year. To a certain degree, thinking about money is normal and prudent, but experiencing stress or anxiety - or obsessing over money - are financial red flags. 

    When it comes to determining whether you're just being paranoid or whether you're really in financial trouble, look for signs you're going broke.

    1. You put your wants before your needs

    Needs are costs for everyday living, such as your mortgage, utilities and medical costs. Wants are things you would like to have, like that cup of coffee from Starbucks, another pair of shoes, or a vacation. If you're living your life covering your wants first and your needs later, you're headed for a financial crisis. If your needs aren't covered, before you make any purchase, stop and ask yourself, "Do I need this, or do I want this?" If it's a want, realize you can't afford it, and don't buy it.

    2. You live paycheck to paycheck

    Being desperate for your next paycheck is a clear indication you're going broke. It might be a sign you act on impulse and you're so concerned with today that you spend all your money without regard for tomorrow. You might be getting by right now, but living in the moment will catch up with you. To avoid a financial crisis, do a budget analysis at least once or twice a year. Look at what you have coming in, what's going out, and what you have saved. If you don't, you'll always be in trouble, and you'll always be stressing over money.

    3. You're using credit cards for everyday expenses, and not paying the bill off each month

    You're at risk of going broke if you're propping up your lifestyle with credit cards. As of early 2016, the average interest rate on credit cards ranged from 12 percent to 16 percent APR. You shouldn't have to borrow money and pay it back with interest to cover your electric bill, phone bill or rent. These expenses are supposed to be factored into your budget. IF you can't pay everyday expenses, it's a problem - and it's usually due to overspending on unnecessary items. Call your CB&T banker and let us help you establish a budget.

    4. You don't have savings

    We all get hit with unexpected expenses at some point. Within the span of 12 months, 60 percent of households experienced a financial shock, such as needing a major auto repair, home repair or dealing with less income than expected due to job loss, reduced hours or a pay cut. And over half of the households that suffered financial shocks struggled to make ends meet afterward.

    Without savings, you'll also be ill-prepared to handle emergency expenses, and when they arise you'll be at risk of a financial crisis. To avoid going broke, make a savings plan for today and tomorrow. Put money away for today, which covers your today costs. Put money away for retirement so you aren't working forever. And also put money away for an emergency fund that's just there. Three separate funds.

    5. You take payday loans

    Each year, 12 million Americans use payday loans. Needing a payday loan, regardless of the reason, is serious. Resist this urge. If you've left yourself no wiggle room, you're supposed to have six months' worth of expenses in a bank account, but you don't have six days. If you can't even cover your finances until pay day, you have to stop spending and start building a cushion. Borrowing more on a payday loan is simply a bad idea; don't do it.

    6. You're paying for credit with credit

    Borrowing to spend is a common route to financial crisis. People often run up credit card debt they can't pay off, then start looking for more credit. One credit card turns into two. Two turns into four, and the next thing you know, you have bunches of credit cards. You're using the Visa card to pay the American Express, the American Express to pay Discover, and so on. Or, people get home equity loans to pay off their credit cards, then run them back up again. So now they have a home equity loan and credit debt. When you have a mountain of credit card debt, you need to start living below your means. Take the extra money, and pay off your credit cards one at a time, starting with the card that has the highest rate. Close all but two credit cards after you pay them off.

    7. Your credit score is declining

    Your credit score is a key indicator of your financial health. One of the biggest signs you're going broke is your credit score starts to decline. The two biggest factors for calculating your credit score are payment history, which accounts for 35 percent of your score, and the amount of credit you're using, which accounts for 30 percent. If your score is falling, you're probably missing payments, usuing too much credit or both. And those are signs you probably don't have money when you need it. At any given time, you shouldn't utilize over 40 percent of the credit available to you. If you go over this rate, your credit score starts to decline, and if that happens, you can perpetuate the cycle by not being able to afford your minimum payments, being charged higher interest rates and possibly more for insurance. If you're missing payments, look for ways to cut costs so you can pay your bills. If you still can't pay, contact your personal banker at CB&T for assistance. 

    8. You're relying on others financially

    If you're constantly borrowing from your family and friends, your significant other is making financial sacrifices to support your spending habits, and other people have applied for loans and credit for you, you're going broke - if you aren't broke already. You spent all your money, used all your credit, and now you're using others so you can continue bad financial behaviors. Not only are you taking advantage of those relationships, you're also digging yourself a deeper hole. And you're destined for failure. The only way you're going to avoid it is to pare back your spending, pay what you owe and start saving.

    9. You avoid your balances

    If you avoid looking at your bank account balance and you avoid opening credit card statements and other bills, you're headed for financial crisis. You know it, but you don't want to face it. One of the biggest barriers to turning around your finances is admitting you're wrong. No one likes to do it. But you cannot solve a problem unless you own up to it and determine how severe it is. When you make financial mistakes, don't avoid the issue. Take responsibility, and make the necessary changes. If you dig a financial hole, no matter how you got there, you have to be very dedicated to get out. Otherwise, that hole gets dug really fast, and before you know it, you're facing even larger financial issues.

    Please feel free to call your friends at CB&T and let us help you establish a plan that is tailored to your needs. Click here to contact an Officer today.