Smart SpendingSmart Spending

10 signs your finances are in trouble

Any one of these red flags should tell you that your personal finances are teetering on the brink of disaster.

By MSN Money Partner Jan 25, 2013 11:12AM

This post comes from Len Penzo at partner blog Len Penzo dot Com.


Len Penzo dot Com logoOne of my favorite television shows is National Geographic Channel's "Locked Up Abroad." Each week, this absolutely fabulous show features the story of somebody who had the misfortune of either getting incarcerated in a foreign prison or kidnapped abroad and held against his will.


Past due stamp sitting on three bills. © Derek E. Rothchild, Stockbyte, Getty ImagesFor those of you who haven't seen it, "Locked Up Abroad" is narrated on-camera by the actual people whose story is being told. This first-person narrative not only gives the show an emotional kick that would otherwise be lacking, but it also effectively conveys the tension that these poor folks were feeling at the time of their ordeals. I always find myself squirming on the edge of my seat as their stories slowly unfold.


Sadly, a common thread that stands out in almost every episode is that most of these folks could have avoided their fates if they had only heeded the red flags that were flying all around them.


If it weren't so tragic it would be comical.


"I entered Caracas international airport with 20 kilos of heroin strapped around my waist. Then I saw the drug-sniffing dogs, relentless police presence, and even the paramilitary conducting on-the-spot body cavity searches. At that moment I knew I should've turned around and called the whole thing off -- but then I took a deep breath and told myself to stop being paranoid because everything was under control."


Of course, the ex-cons featured in "Locked Up Abroad" aren't the only ones who ignore obvious signs of impending doom.


In the personal-finance world, people routinely ignore red flags that suggest their financial situation is unstable and susceptible to collapse.


That's important to know, considering that debtors' prisons still exist in the United Arab Emirates and, somewhat ironically, in Greece -- which is why I'm sure that it's only a matter of time before I see an episode of "Locked Up Abroad" featuring the story of a debtor who got stuck in a Greek hoosegow.


Thankfully, the rest of the world has abolished debtors' prisons. They've since been replaced with bankruptcy, civil litigation and ruined credit ratings.

Even so, you should always be on the lookout for the following red flags that can signal your finances are in disarray:

  • You have revolving balances on your credit cards. Folks who fail to pay off their credit card bills in full each month, by definition, are in violation of one of the 10 commandments of personal finance. That is, they spend more than they earn. As a result they're more susceptible to defaulting on their obligations down the road.
  • You rely on payday loans to cover your bills each month. This is one of the worst examples of living beyond your means.
  • You've been turned down for a consolidation loan. This is a sure sign you are already overextended and that your debt-to-income ratio is too high.
  • You're hiding your spending behavior from family members. This red flag indicates that you are aware of your personal finance problems but are unable to acknowledge them. Fighting with your spouse is a related indicator, as financial troubles often lead to domestic troubles.
  • You finance your vehicle for more than five years. This is a clear sign that you're buying more vehicle than you can reasonably afford.
  • You get more than one late notice per year. Everybody may let a bill fall through the cracks and forget to pay it once in a blue moon. But if you find yourself getting multiple late notices for bills, especially for utilities, that's a signal that your finances may be in serious trouble.
  • You bounce more than one check per year. Again, most folks have had an overdraft of a checking account. But if this happens to you more than once a year, it's usually a sign of trouble.
  • You need a co-signer to get a loan. Those without a credit history can ignore this warning sign. However, for everyone else, the need for a co-signer indicates that banks no longer find you creditworthy.
  • You find yourself borrowing from your family and friends. Borrowing from friends or family members is a surefire way to sow the seeds of discontent -- especially when you fail to pay the money back.
  • You lack an emergency savings account of at least three months' living expenses. Those who are living from paycheck to paycheck can be completely derailed by even the most modest unexpected expenses, such as the need for car repairs.

So there you have it. If you find yourself stuck in two or more of these habits, you had better get your financial house in order, pronto.


And even quicker if you're living in Greece.


More from Len Penzo dot Com and MSN Money:

Jan 26, 2013 11:10PM
You either have to make more or spend less.    Instead of paying 40 grand for that new car, buy a used one for half the price and pay cash.    Remember that house you are paying on does not belong to you until you pay off the mortgage.  It belongs to the bank.  If you do  not think so miss a few payments.  
Jan 29, 2013 10:52AM

If you are borrowing money from your kids, and they are still in grade school... you may be in financial trouble.

If you got a 7 year car loan, to pay off your 8 year old car... you may be in financial trouble.

If you are thinking of charging your dog rent... you may be in financial trouble.

If you live in your parents basement, but need to downsize... you may be in financial trouble.

If you are leaving I.O.U.s on the parking meter... you may be in financial trouble.

Jan 27, 2013 12:45AM
Jan 27, 2013 10:03PM
How about this,
You are not able to save at least 10% of your income. Then you should know, you are in trouble.

Feb 4, 2013 9:44AM
Sounds just like the United States of America....perhaps we should email this article to every member in Congress
Feb 4, 2013 12:14PM
Carrying a balance on a credit card isn't necessarily a financial sin.  I am a financial analyst and I've carried balances on credit cards before.  The only reason I have or will is if I have an interest free credit card.  I rotate credit cards on a frequent basis and most new cards have offer periods with 12-18 months of no interest, although you may need a great credit score to qualify for them.  I agree you should not spend more than you make at any given time, but emergencies and/or big expenses take place.  If you are looking to buy something expensive right away and do not have a 3-12 month period to save for that or those items but do not want to be killed by credit, look at an interest free credit card.  I only suggest this to those that have the maturity and control to be able to pay them off as quick as possible.  Carrying a balance will hurt your credit score for a short period of time.  Here's a tip:  Call your credit card company (I used to work for one) and ask them to lower your interest rate or you will go elsewhere with your business (assuming you pay on time and have been a loyal customer).  Most of the time they will lower it for a period of 6 months.
Feb 4, 2013 12:25PM
More blinding insight from MSN Money.
Feb 4, 2013 10:06AM
Funny, no mention of if you get nailed in your **** by Big Oil you may be in financial trouble!
Mar 4, 2013 11:44PM
If you've got time to read my story, I'm the poster girl for the worst financial behavior of all time. For 31 years I worked for state government and from the get go I became infatuated with men I worked with. I spent money on clothes, shoes, cosmetics, and jewelry. Never mind buying a $2.50 tube of lipstick at a local drugstore or Avon, it had to be a $.34.00 tube of lipstick from Chanel. Once I spent $600.00 on a Chanel skincare line. I had such a stockpile of Chanel makeup that I could've had stock in the company. Shoes from Payless? What? Are you kidding me. They had to be $150 shoes designed by Michael Kors. I spent money on suits, dresses and coats all on credit in the hope that these men would fall in love with me. Not only was I looking for Mr. Goodbar, but I was also trying to keep up with the Jones. Shut up I bought three houses at one time all on a secretary's salary. In the 31 years I worked, I never put away a single dime for my retirement. The end result was  two bankruptcys and I ended up retiring on a less than modest retirement income. My advice to everyone is that no man or woman is worth the financial strain because none of those guys I worked with never even gave me the time of day. If you're trying to keep up with the Jones, be afraid be very afraid because the Jones will break you. Lastly, with all the new medicines, nutrition, and medical technology, we're living a lot longer. so even if it's a dollar out of your pay, every penny will count when you retire. And please, please use your credit card wisely. They say that bankruptcy is a fresh new start. Well good luck in getting a landlord to rent to you and a car dealer selling you a new car. Need I say more?
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
100 character limit
Are you sure you want to delete this comment?


Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.


Smart Spending brings you the best money-saving tips from MSN Money and the rest of the Web. Join the conversation on Facebook and follow us on Twitter.