10 signs your finances are in trouble

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

One 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.

For 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:

• My 10 commandments of personal finance
• 41 reasons why I'm not lending you money
• Why marriage makes it so hard to control remodeling costs
• Should you get a 7-year car loan?
• Should you co-sign a relative's loan?
• Why you can't get a home loan