5 signs your finances are on the brink
If at least 2 of these red flags apply to your financial situation, you could be heading toward big trouble.
This post comes from Brian O'Connell at partner site MainStreet.
Most of the time any foreclosure or a personal bankruptcy is years in the making. Unfortunately though, along the way people often don't see the warning signs that could stop -- or at least slow down -- the problem before it hits critical mass.
According to the Federal Reserve Bank of New York, as of the fourth quarter of 2010 approximately 2.8 million U.S. homes had gone through foreclosure, and an additional 2 million homes were in the process. Bankruptcy numbers aren't much better, either, even if they are trending in the right direction. The American Bankruptcy Institute reports that the total number of U.S. bankruptcies filed from September 2010 to September 2011 was 1.47 million, down from 1.60 million in the previous year. Post continues below.
How can you avoid become a statistic in either group? With a built-in radar system that warns you when your financial picture is starting to spin out of control. Here are five red flags that you can use to build that warning system:
You keep overdrawing your checking account. A bank checking account is like the proverbial canary in the coal mine when it comes to your personal financial picture. If you're constantly overdrawing it -- even once in a month is a serious sign if it happens repeatedly -- you need to get your financial act together. You're likely spending too much money and possibly accumulating too much debt, or your income simply does not meet your expenses, in which case there are other forms of assistance to consider. Fix the problem by building a monthly budget and sticking to it.
Your credit card payments are dwindling. If you can afford to make only the minimum payments on your monthly credit card bill (if that), you've got a borrowing problem. A credit card user keeps paying interest on that big outstanding balance, and within a few months a $5,000 credit card tab can climb to $7,500. The solution? Use your card less (ideally, only for emergencies) and pay at least twice your minimum payment. That should keep you out of credit card trouble.
Your emergency fund reads "zero." If you don't have an emergency fund, or the one you have is on life support, you're courting big financial trouble. Experts historically say you should have at least six months' worth of income stashed away in a savings fund, but it's better to aim even higher. Build a 12-month cushion in case you lose your job or suffer from a major illness or injury. Most bankruptcies occur after a job loss or a serious health issue, so a proper emergency fund can save the day in that regard.
You have to choose which bills to pay. If two bills come in the mail and you can't afford to pay both, you're overstretched financially. If this happens once, no worries -- it's a tough economy, and most people have problems with a bill at one time or another. But if it's a monthly occurrence, then you're in red-flag territory and need to revisit that budget and see where you can cut some meat off the bone (or take a second job to earn more income).
Your credit score is below 620. If your FICO score is heading south faster than a Canada goose in December, that's obviously a big red flag. The lower your score, the more expensive it becomes for you to get credit. (Creditors charge higher interest to give credit to consumers with low credit scores -- if they grant them loans at all.) Read your credit report at least twice a year and directly address any problems right away.
If you find that you meet at least two of these red flags, you could be heading toward financial peril. But if you pay attention to the warning signs, you could help to avoid or reduce the impact of a potential financial Armageddon.
More on MainStreet and MSN Money:
This article states the obvious... we already know we're in financial harm's way... but most of us are trying, contrary to popular belief. I'm applying like mad for more work to augment the one that doesn't pay the bills... hire me and give me a chance, You can overcome! Don't get discouraged, and don't give up. I think Churchill said, if you're going through hell, keep going! (we'll get out of it eventually if we keep moving)
I was thinking more along the lines of these five signs:
1. You don't have a job
2. Any "benefits" available are played out
3. Your family no longer speaks to you about money
4. Food is being obtained from your favorite restaraunt dumpster
5. The Fed Chairman is requesting advice from you!
- You were laid off, have been desperately looking for a job, and finally were able to find a part-time job making about 1/4 of what you used to make.
- You had to pull money out of your 401k just to have food and now the government is penalizing you.
- The Publicants are in control and refuse to close the tax loop-holes only the wealthy (themselves) get to enjoy.
Put up a profile and you'll get hit, and I mean hit hard.
We are in an abeyance period when things seem like they might conceivably start going ok. But don't be fooled.
This corrupt government answers to the money and the superpac corporations that they are selling out to. Meanwhile, all we get is more smooth talk from the prez, and no real action.
You think your single vote means anything after they have it? NO! But the bucks they sold their soul for to get into office has to be repaid in endless **** kissings to the anointed few, the landed gentry, the heartless greedy biz jocks.
None of this is going to get better until we get serious about getting the money out of politics.
Meanwhile dream on about a good job. Even if you could get one, you would be cut in pay so badly, you might have a problem paying even the most ordinary costs of living.
Look for another country to migrate to when necessary.
Good article because the facts are the facts. Yes the cost of everything under the sun has gone up and way faster than wages but that doesn't mean that people need to go out and buy new new and more new stuff. I remember not having a cell phone until I was in my 20's and they had been around a while. I just didn't want the added bill. Now I only have a cell phone and no landline and it is 3 times as much money. Will I get rid of it probably not but I did survive without it once and could do it again other than friends and family freak out because they can't get ahold of me at a moments notice.
I save and save and budget and look at that budget over and over again every month. I save 12% of my salary in a 401K, pay extra on my mortgage, have 2 credit cards that are 0% for one year and have budgeted that to payoff before the interest changes. I have 2 vehicles with over 150k miles on them that look and run like they have 20k. No car payment but I make one to myself every month into a savings account so when I do need a new vehicle I can hopefully pay cash.
Yes times are tough and people don't have jobs and people live in areas where it is very expensive to live but that was your choice to begin with on where you live and yes I know that you didn't have a choice in being let go or the comany closing and that I do have sympathy for.
People want to blame the banks but guess what a bank is a business. They are not given money every month to run the computers, pay the processing fees for your debit card and check transactions. If people really took the time to look at the expenses of a bank for your "free" checking account then those people wouldn't have an issue paying a monthly service fee or whatever you want to call it.
#6 - banks wanna do ANY business with you besides storing your money, feesfeesfees: so underwhelming - that is kind of funny...
still waiting on the zombie apokolypse
Copyright © 2013 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.
ABOUT SMART SPENDING
Editor Bev O'Shea lives and works in the foothills of the Appalachians. A former copy editor for The Atlanta Journal-Constitution and the Orlando Sentinel, she joined MSN Money in 2007. She's a fan of sunsets, college football and free shipping, among other things.
Having worked as a writer, reporter and editor for more than 25 years, Editor Julie Tilsner is the sort of person who can't help but correct grammar in Facebook postings and on billboards. She's written for BusinessWeek, the Los Angeles Times, Parenting, Redbook, AOL and others. She lives in Los Angeles County with her family and loves to drink wine and practice yoga, although not generally at the same time.
A writer for MSN Money since January 2007, Donna Freedman won regional and national prizes during an 18-year newspaper career and earned a college degree in midlife without taking out student loans. She also writes about smart money tactics for magazines and on her own site, Surviving and Thriving.
Mitch Lipka has been warning people about scams and shining light on questionable business practices for more than 20 years. Mitch, the consumer columnist for The Boston Globe, has also been a reporter and editor at The Philadelphia Inquirer, Consumer Reports, South Florida Sun-Sentinel and AOL. He won the 2010 New York Press Club award for best consumer reporting online and was honored in 2011 for his reporting on child product safety.
Marilyn Lewis is an award-winning writer with a passion for getting readers clear, straight information that helps them stay out of financial trouble. A former reporter for The San Jose Mercury News, she works from her home in Port Townsend, Wash. Contact her at MarilynLewis@Outlook.com.
LATEST BLOG POSTS
These airlines have taken a la carte flying to a new level, charging for everything you can think of and then some.