Forget clowns. Money is what’s striking fear into the hearts of the average American. Eighty-five percent of people are losing sleep because of financial anxiety, a Northwestern Mutual survey of 2,646 adults living in the United States found. Worries about personal finances, including fear of experiencing a financial emergency, losing a job, or a long bout of unemployment, is negatively affecting people’s health, happiness, and careers, the survey found.
People are right to be concerned. The typical American’s financial situation isn’t exactly rosy. Many are up to their ears in debt, and 75% are living paycheck-to-paycheck at least some of the time. More than 60% have less than $1,000 in savings. A significant number of us seem to be one short step away from financial disaster. Worse, we seem to be unwilling or unable to do anything about it.
Though money fears may be giving people anxiety, changing bad financial habits is hard, especially when you don’t realize exactly what you’re doing wrong, or don’t realize how serious the problem is. People who overspend and don’t save enough “often don’t realize how much harm they’re doing to themselves until the worst happens,” financial advice columnist Michelle Singletary wrote in the Washington Post.
Often, the warning signs you’re headed for a financial trainwreck are there long before the disaster arrives. If you can spot the flashing yellow lights, you can clean up your act before you run completely off the rails. Here are five subtle warning signs your personal finances are a mess.
1. You’re not sure where your money goes
You make a good salary, but somehow, you’re still broke at the end of every month. Feeling like your money is pulling a disappearing act is a bad sign, but not an uncommon one. Many people resist taking a closer look at their spending habits because it can bring up feelings of “guilt, remorse, shame or frustration,” Brad Klontz, a psychologist and financial planner, told the Wall Street Journal.
How to fix it: It’s time to start tracking your spending. Tools like Mint, You Need a Budget, or your bank account’s spending report make this fairly easy. You can look at your transactions over a month or two and see exactly where the leaks are as you total up how much you spent at Starbucks or on random Amazon purchases. Once you realize where your money goes, you can prioritize your spending, pay down debt faster, save more, and achieve your financial goals more quickly.
2. You sometimes can’t pay off your credit card bill
Credit cards are a useful tool, but it’s all too easy to fall into a dark pit of debt when using them. You’re not alone if you’re using plastic a bit too freely — the average American has managed to rack up more than $15,000 in unpaid credit card bills – but it is a warning sign of trouble to come. If you’re using your cards for impulse purchases and then often find you can’t pay your credit card bill in full at the end of the month, it’s time for a financial intervention.
How to fix it: Learn how to use credit cards responsibly and don’t treat them like a source of free money. Before making a purchase, whether it’s a $20 dinner or a $2,000 vacation, make sure you’ll actually have the cash to pay the bill when it arrives in the mail. Hint: If you’re tracking your spending and have a budget, it will be a lot easier to do this.
3. You cut back on necessities to buy other stuff
You just had to have that designer dress or new game system, but now you’re eating instant ramen for dinner for a week straight because of your splurge. If your spending on travel, eating out, and other “nice to have” stuff is making it difficult to cover the basics, like groceries or retirement savings, your priorities are out of whack.
How to fix it: Budget, budget, budget. Figure out how much you need to meet your essential expenses, including housing, food, transportation, and savings. Then, set a budget for your fun spending, whether it’s new clothes, dinner at a Michelin-starred restaurant, or a spa weekend with your best friends. You’ll soon find you can enjoy the finer things in life while still being financially responsible.
4. You’re sometimes late paying your bills
One quarter of Americans don’t always pay their bills on time, a survey by personal finance website NerdWallet found. Some of them might be juggling bills to make ends meet – paying the rent on time, but putting off paying the cable bill until the next payday – but others are probably just disorganized. That disorganization costs you in the form or late fees and a potentially lower credit score. And if you can’t get it together to write a rent check or send in your student loan payment, chances are you’re not doing a great job of managing other areas of the your personal finances.
How to fix it: Payment reminders and automatic payments make sure everyone from your landlord to your student loan lender gets their money on time. When you receive an irregular bill, pay it right away so it doesn’t get lost in the shuffle. If it’s a cash flow problem that’s causing you to be late, see if you can adjust your due dates. You may be able to group your payments so they fall closer to payday, or spread them out over the month if that works better for you.
5. You sometimes overdraw your bank account
When does a $5 cup of coffee cost $40? When you overdraw your checking account and get hit with a nasty fee. The average overdraft charge is a shade over $33, and banks rake in $11 billion every year from consumers who are spending money they don’t have. Most of those fees are charged on purchases of less than $24, the Consumer Financial Protection Bureau found, and are essentially the same as a loan with an APR of 17,000%. If you’ve been hit with overdraft fees several times in the past year, consider it a wake-up call.
How to fix it: Turn off overdraft protection. Your card may get declined at the register, but a little embarrassment is less painful than high fees. You can also use your bank’s app to check your balance on the go so you know how much money is in your account before you swipe.