Have you ever been on a road trip with friends where you literally got lost in conversation? Chatting with friends and enjoying the open road is wonderful – until you realize you weren’t paying attention and haven’t a clue where you are! It can be quite the adventure trying to get back on track.
Money management is similar. Often times, we get caught up in the moment and fail to see the signs telling us to make course adjustments. Before we know it we’re lost in the woods of credit card debt, and the highway is nowhere in sight.
The first thing you must do, therefore, is discipline yourself to be attentive to your surroundings. Be on the lookout for the signs of financial trouble in your own life so you can avoid going down the wrong path!
Once you’ve made the decision to watch the road, you need to learn the signs. In your money management, here are the top signs to look for that indicate you’re heading for credit card debt:
- You transfer balances to avoid making payments – consolidating credit card debt into one low interest account is one thing, but if you catch yourself frequently shuffling debt around to avoid making payments then take note! It’s a red flag of financial trouble.
- Basic needs are continually met using your credit card – if you find you regularly charge groceries, gasoline, and other basic needs on your credit card then it’s time to stop and consider your financial situation. Your budget from wages, etc. should be used to fill these needs. If you continually find you’re running out of cash, you are in danger of falling deeply into credit card debt.
- You charge more on your card than you are able to pay – this is another sign you are in trouble. Regularly charging $75 here and $50 there when you can only afford to make the minimum $30 per month payment is a recipe for credit disaster.
- Your emergency fund is exhausted – unexpected emergencies come up. Having three to six months of savings to cover yourself is a money management best practice. If you are living paycheck to paycheck, you need to consider putting whatever you can aside. Otherwise, when an emergency room visit comes up or a vehicle breaks down, you may have to charge it to credit – and put yourself in a financial bind.
- Your credit cards are maxed out – hit the brakes hard. If all your credit is used up and you’re even considering opening another account, stop. It’s a spiral, one that will pull you down ever more. It’s time to review your finances, trim expenses, and come up with a plan to rescue you from credit card debt