The Signs of Impending Financial Ruin

Only rarely do life’s sudden disasters completely destroy your finances, send you into bankruptcy, or cause your property to be seized. Most of the time, these financial crises are long in coming. Financial trouble can usually be spotted ahead of time. The trick to avoiding the serious problems is knowing the signs of danger, and having the fortitude not to ignore them.

To avoid trouble further along the line, you must look at your life, recognize potential risks, and act to correct them. Below are some signs of possible future financial problems.

First, beware if you find your bank balance statements constantly surprising you. Check your bank balance often. If you are low on money, the worst thing you can do is avoid checking your bank balance out of paralysis and fear. Most banks let you check your balance online, and it’s almost always up-to-date on your latest transactions. By checking your balance often, you’ll know how much money you’ve been spending. Without this knowledge, it is impossible to plan your expenses. On the other hand, if you spend more money than you have, your bank will bombard you with fees, sending you spiraling ever-further into discouragement and debt.

Another sign of trouble is an empty savings account. You don’t need tens of thousands of dollars saved up, but you should have some untouched money in there. A full savings account is a good basis from which to invest, and let your money do some of your work for you. More importantly, having a savings account is necessary to protect you against unpredictable drains. Always put away a little extra in your savings account every month, even if you are on a tight budget.

A large credit card debt is another problem-indicator. Credit cards are not in themselves evil, but they must be used carefully. Racking up a large debt and then paying off the interest month-to-month, while the total debt stays the same is a needlessly expensive situation to be in. You might as well be throwing away money. Plus, if you’ve maxed out your credit card on buying furniture, TVs, or lobster dinners that you can’t afford, you won’t have access to all that credit in the event of a real emergency.

Finally, if you’ve taken out a mortgage to buy a house, ignorance can be an obvious sign of future trouble. According to a survey by GfK Roper, one third of American homeowners are so clueless about mortgages that they are unable to say what type of mortgage they have. If you have any kind of non-traditional mortgage - for example, a mortgage with a floating interest rate, or with an interest rate that varies during certain years - your cluelessness could cost you. What could be worse than finding that the minimum monthly payment on your mortgage has suddenly gone way up, and you can’t afford to pay it off because you haven’t prepared? Hurry! Get in touch with your bank or other lender, and ask what kind of mortgage you have. Ask the representative to explain if you don’t understand. It’s their job.

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