As the housing crisis worsens and the economy looks increasingly weak, most Americans are facing the reality that their finances are in a bit of a wreck. Chronic overspending, a lack of savings and too much bad debt have left many in a financial condition that they would prefer not to be in. Here are some top warning signs that your finances are in a wreck, and how to get out of the problem.
You spend more than you make.
It sounds overly simple, but many of us do not realize how much we spend in a month. Take the time to keep a log of how much you spend in one month and compare it to your salary. If the numbers are dangerously close, you’ve got a problem. Don’t forget to include your credit card purchases on there as well, since you will be paying for them.
Solution: Set a monthly budget that you can stick to. Add up the expenses that you can’t help, such as rent or utilities and then build from there. Try to free up as much money as you can. As we mentioned above, credit card spending should be included in this budget, even if you don’t have to pay for those items right away. By limiting how much you spend on your credit cards in this manner, you can start carving away at your debt. It is important to set a budget that is not too difficult to stick to. Allow yourself a little wiggle room, but make sure that you do come in well under what you make each month.
You are falling behind in your bills.
A couple of days late here, a week there – after all, the phone company doesn’t really mind, do they? If you are finding that you are trying to space out your bills to the point where you are chronically late on all of them, this is a sign that you have a major problem. Late payments really do matter, whether you realize it or not. Even phone companies report to the credit bureaus and you will not be doing your credit rating any favors.
Solution: Budgeting can help with this, but if you are finding that your paychecks are not syncing up with the due date, it is important to do something about it. Most companies will allow you to change your due date to something that is more suitable for your paycheck schedule, but you will have to ask. This is a great solution if you have the money to pay the bill, but you just don’t have it on time.
These are two simple solutions that can bring a wrecked financial plan into better territory. However, it is vital to break that cycle of relying on your paycheck to meet all of your financial needs. Consider debt leverage to create more than one stream of income. This will free up your finances and chances are, you’ll sleep a lot better at night.