More than half of U.S. adults give themselves a grade of A or B when it comes to their financial knowledge, according to the National Foundation for Credit Counseling’s 2016 Consumer Financial Literacy Survey. Although the majority of Americans think they have a good understanding of personal finance, the survey shows that many people still don’t have good money habits.
“You might think that if someone is in financial trouble, they know it,” said Neal Frankle, a certified financial planner and founder of WealthPilgrim.com. “But my experience tells me that it’s very easy to be deep in a financial pit without even realizing you have a problem.”
Despite what you think, you might not be taking your finances seriously. Here are nine signs that you aren’t, as well as tips on how you can take control of your money.
You Don’t Have a Budget or Spending Plan
Even if you think you have an idea of how much money you’re spending each month, you won’t get ahead financially if you don’t know exactly where your money is going and where you actually want it to go.
“It can be a good exercise for anyone looking to improve their current situation to take one month and write down every expense that is paid,” said David G. Niggel, a certified financial planner and founder of Key Wealth Partners. “Please stay honest with yourself. Write down the $1 coffee that you only got the one time. Groceries, meals out, drinks with friends, shopping — it all adds up at the end of the month.”
Learn More: Why You Need a Spending Plan — Not a Budget
This exercise can be an eye-opener because you’ll see that you’re spending a lot of money on things you don’t need. “You can reevaluate your spending habits and make adjustments to meet your goals,” said Niggel. “These can be small goals such as ‘start a savings account’ or ‘contribute 1 percent more to my 401k plan at work.’ These small changes can add up over time and be a real game changer to your future.”
However, you can’t make these changes and improve your finances without a plan. Use a zero-sum budget, which involves giving every dollar you earn a purpose. Start with how much you made the previous month then divvy up that amount for bills and expenses for the upcoming month. Whatever is left should go toward savings and debt repayment at the beginning of the month before you have a chance to spend it on unnecessary things.
You’re Living Paycheck to Paycheck
You might think that you’re always scrambling at the end of the month to pay your bills because your income is limited. But your financial habits might be the real reason you’re living paycheck to paycheck.
“If you worry about how to keep the lights lit, food on the table and the rent paid at the end of most months, you know how crushing that anxiety is,” said Frankle. “Your best approach is to take drastic action and put things right.”
Start by reviewing your bank and credit card accounts to pinpoint all the nonessential expenses that you can cut. Are you regularly getting meals on the go, paying for a premium cable package or driving when you can walk? Also look for big monthly bills you can trim, such as utilities and insurance.
If you’re already living on a bare-bones budget, find ways to make more money. “Take on a second job, bring in roommates or whatever you need to do to put a little bit of daylight between you and the bill collector,” said Frankle.
Your Savings Account Balance Is $0
Stashing money in a savings account might not be your top priority. After all, the average interest rate on savings accounts is less than 1 percent. Still, you need to have cash reserves.
“Savings should be everyone’s first priority because it’s the cushion that prevents us from getting into other financial challenges like overdrafts or credit card debt,” said Shannon McLay, founder of The Financial Gym, which helps people get financially fit. If an emergency strikes or unexpected expense arises, you need cash to pay for it so you don’t fall into debt.
McLay recommends setting up regular automatic transfers from your checking account to a savings account. “Transfer it with each paycheck, and then live off of what’s left in your checking account,” she said. “If you move money out of your savings, remember that you owe it back to yourself the next time you have excess cash in your checking.”
If possible, transfer 10 percent to 15 percent of your paycheck to your savings, and build an emergency fund to cover several months’ worth of expenses.
You Make Payments Late
“It’s easy to miss a debt payment. We all make mistakes,” said Frankle. “But if it happens more than once in a blue moon, it’s no longer a mistake — it’s a pattern.”
If you make late payments, you’ll be hit with fees that add to the cost of what you owe. For example, credit card fees for late payments can range from $27 to $38. Plus, making late credit and loan payments can hurt your credit score. And a low score will hurt your ability to get credit and loans in the future.
To avoid making late payments, set up automatic bill pay with your bank or credit accounts. Or, use an app like Mint Bills to get reminders when bills are due.
You’ve Been Denied Credit
If you’ve applied for credit and have been denied, it’s likely a sign that your money habits are hurting your credit score. Your score is the three-digit number based on information in your credit report. Lenders use this score to decide whether to give you credit and at what rate.
Several credit card companies now provide cardholders with their FICO credit score, so check your statement. You can get your FICO score for a fee at myFICO.com, and you can get your credit report for free at AnnualCreditReport.com to find out what factors are affecting your score.
“One of the biggest reasons people’s credit scores are low is due to high credit card utilization or high balances given your available credit,” said McLay. “Once you start paying down your balances, you will see an instant boost to your credit.”
Late and missed payments are other factors that can pull down your score. “If your score is low because of a delinquency, uncollected debt or bankruptcy filing, it will take you a minimum of seven years to overcome this fully,” said McLay. “However, you can start to make amends on your credit score immediately afterward.”
“The sooner you start managing your credit better, the faster you will improve your score,” she added.
You’re Drowning in Debt
Although it’s difficult to eliminate mortgages and student loan debt in a short amount of time, you should be able to get rid of your credit card debt in a timely manner. However, the median amount of credit card debt among Americans is $2,000, found GOBankingRates’ 2016 Household Debt survey.
“If you have credit card debt you can’t pay off, something has to change,” said Frankle. You may think that since the debt isn’t growing, everything is copacetic. But unless you pay that debt down, you’ll be shackled by astronomical interest costs that rob you of your financial future.”
For example, you’ll have less money to put into retirement savings, less money to achieve your financial goals — like owning a home — and less money to do things you enjoy if you’re always making debt payments.
Frankle recommended refinancing high-interest credit card debt with a lower-interest personal loan. Then, put all you have toward paying that debt off as fast as you can, he said.
Other smart strategies to get out of debt include transferring balances to a credit card with a 0 percent introductory rate to reduce the interest you have to pay. Just remember to pay down the balance before the promotional period ends.
You’re Not Thinking About Retirement
If you’re young, you might think you have plenty of time to save for retirement. In fact, it’s easy to tell yourself that there’s not enough room in your budget when you’re starting out to cover expenses today and save for the future. So, you focus on today instead of the future.
However, you’re just making it harder for yourself when you get older to make up for lost time. Consider this example: If you start saving about $160 per month at age 25 and earn 10 percent annually, you’ll have around $1 million saved by the time you are 65. If you wait until 35 to start saving for retirement, you’d have to set aside around $442 per month to reach $1 million by 65. If you waited until 45, you’d have to save more than $1,000 per month to amass the same amount.
Turn retirement saving into a money habit by having at least 10 percent automatically withdrawn from each paycheck for a 401k or other workplace retirement contribution. If you’re self-employed, you can set up automatic transfers from your checking account to an IRA, solo 401k or another individual retirement account.
You’re Starting a Family Without a Financial Plan
“One sign you should start taking your finances more seriously — before it’s too late — is if you’re expecting a new baby,” said Josh Brein, a financial planner and founder of TheArtofaPlan.com. “If you have a bun in the oven, then by default, you definitely need to step up your game around your money.”
A big sign that you haven’t adjusted your financial habits to prepare for your new arrival is if you don’t have any cash set aside to cover the additional costs that come with having a child.
“You need to be ready for emergency expenses like extra medical costs, such as deductibles and co-pays,” said Brein. “They can really add up.”
Start saving now to accumulate a few months’ worth of expenses in reserves. “You have zero control over when your kids get sick, but rest assured, they will eventually,” he added. “If it involves a stay in the hospital it could cost you thousands — even though you have health insurance already.”
Also, get a life insurance policy because you will have someone who is depending on you financially. Make sure the policy is big enough to compensate for your lost income if something happens to you. LifeHappens.org has a calculator you can use to figure out your life insurance needs.
You Let Your Emotions Control Financial Decisions
The stock market falls, so you sell your shares because you’re afraid. You see an ad about buying life insurance for your children that tugs at your heart strings, so you get a $50,000 policy. You take all of your money out of the bank and stuff it under the mattress because you’re worried about the economy.
“Letting emotions control your financial decisions is a red flag that will stand in the way of financial success,” said Ryan Gerstel, vice president of Gerstel Wealth Management Group. “In order to put yourself on the right track, it is essential to define your priorities as the foundation for your financial health. Adhering to a set of practical guidelines that support your values reduces the risk of gambling with your future.”
In other words, if you have a financial plan based on your goals, use that list rather than your emotions to guide you. For example, if you’re saving for the long term, you can afford to take a little more risk by investing in stocks or stock mutual funds so your money will grow more over time. You don’t need to let gyrations in the market scare you if your portfolio is diversified.
Hiring a financial planner or taking advantage of any investing resources you have access to through your employer can help you create a plan you can stick to.
Read More: Why Your Emotions Are Making You Broke