10 Key Signs You Should Be More Concerned About Your Finances
Written by
Martin Dasko
Edited by
Gary Dudak
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According to a recent GOBankingRates survey, 26% of respondents stated they had no concerns about their financial situation. However, 32% admitted to not making enough money and 26% shared that they couldn’t save money, so we wanted to break down why those who believe they don’t have any financial concerns could be a bit overconfident.
Here are 10 key signs you should be more concerned about your finances.
You’re Spending More Than You Earn
While nobody aims to spend more than they earn, this can happen naturally when you start bringing in more money than ever before. As your income increases, you may be tempted to reward yourself.
“[People] may feel fine since they see large lump sums of money going into their accounts, but they may be in a cycle where they are spending more than the cash coming in,” explained Gloria Garcia Cisneros, a CFP and wealth manager.
High-income earners may have a false sense of confidence because they assume that the money will continue to roll in. If the money ever slows down or they experience a job loss, they could face serious financial consequences for overspending.
You Don’t Have an Emergency Fund
One of the biggest financial red flags is not having an emergency fund where you have enough money set aside to cover expenses for up to six months or pay for an unexpected bill.
“If someone has no savings or emergency fund to fall back on in case of unexpected expenses or job loss, it could be a sign that they are not fully aware of the risks and uncertainties that come with managing finances,” shared Michael Collins, a CFA and founder of WinCap Financial.
While you may be making decent money and staying on top of your bills, you want to be prepared for the worst-case scenario because you never know when you can experience a job loss.
Cisneros elaborated, “If you’re always waiting on your next paycheck to fund all your expenses and there is no emergency fund as a cushion, your overconfidence could be misleading.”
You’re Not Saving Much After Handling Bills
“If you’ve got very little income left over after covering your basic needs each month, that’s a strong indicator that you should be more concerned,” remarked Erika Kullberg, an attorney, personal finance expert, and founder of Erika.com.
Even if you’re able to handle all of your bills, it’s essential that you have space in your budget to set money aside for your future.
“Consistently spending all of your income without any room for saving or investing, can be a red flag for their financial stability,” according to Collins. “It shows a lack of planning and budgeting, which can lead to financial troubles down the line.”
You’re Not Setting Aside Enough for Retirement
Cisneros pointed out that someone can be living a great life day to day, but if they aren’t putting money aside for retirement, they won’t notice the issues until much later. Most financial experts recommend that you invest 12-15% of your income in retirement, and the goal is to stay on top of your retirement contributions.
Cisneros added, “If you aren’t saving and investing, then the lifestyle you have now will be extremely hard to maintain unless you work through the end of your life.”
You can’t work forever, and you want to have enough money invested to live comfortably in your golden years, even if that feels like a lifetime away.
You’re Adding Debt
If you’re taking on too much debt, especially credit card debt, this can be a major cause for concern since it indicates that you’re living beyond your means. When you live beyond your means for an extended period of time, the debt can add up quickly. You could also struggle to make payments in the future.
You’re Not Tracking Expenses
Even if you’re handling your bills and saving for retirement, you still want to ensure that you’re aware of what’s happening with your money. You want to know what’s happening with your income by tracking your expenses.
“Avoiding bills and neglecting to keep track of expenses can be signs of overconfidence in one’s financial situation,” commented Collins. “This behavior can lead to missed payments, late fees, and further financial trouble.”
You Lack Long-Term Financial Goals
While you may be confident about your present-day financial situation, you want to ensure that you have long-term goals that you’re working toward so that you have a reason to care about your finances.
“Lack of long-term financial goals is another red flag because not having any long-term financial goals or plans for retirement can indicate a lack of understanding about the importance of saving and investing for the future,” according to Collins.
You Can’t Stick to a Budget
If you can’t stick to a budget, this is another cause for concern since it could indicate that you’re not fully aware of your spending habits. When you lose track of your spending habits, it’s easy to eventually end up in debt and get stuck in a terrible cycle where you’re constantly borrowing money.
You Borrow Money Often
If someone relies on borrowing money from friends and family, this could be a sign that they’re not managing their finances correctly. While financial struggles will happen, you don’t want to consistently rely on others to bail you out.
You Avoid Talking About Money
“Another subtle sign is that you rarely talk about money with your spouse or partner,” noted Kullberg. “If you tend to avoid conversations around money because it’s too stressful, or you feel anxiety about it, then you’re probably not in a great position financially.”
As difficult as it can be to discuss finances, it’s crucial to note that getting things off your chest is a great starting point if you want to improve your financial habits.
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