Are you skidding into the end of every month with $0 in your bank account and wondering where the money is going? Or are you only making minimum payments on your credit cards?
These are just a few of the “Financial Red Flags” that you should pay attention to — and take steps to fix. (And if you are interested in fixing these, we can help! It’s very easy to make an appointment to talk to one of our certified financial counselors.)
1. Your savings is getting lower and lower. If you find yourself dipping into your emergency fund for things that aren’t true, unexpected emergencies, that’s a sign that there’s a spending problem.
The Fix: Review your expenses and find areas to cut back. Then start small—aim to save at least 10-15% of your income. Automate transfers to your savings account right after payday to make saving effortless.
2. You don’t have a good sense of where your money is going. You reach the end of the month wondering where all your money went and have little to show for it. That’s a sign that you’re not keeping track of where your money is going, and it’s a good time to look at your budget again.
The Fix: Track your spending consistently using budgeting apps, like CommonWealth One's MoneyTools, spreadsheets, or even a simple notebook. Categorize your expenses to identify areas where you may be overspending. Setting up spending limits for non-essential categories can help you regain control and make intentional financial choices. Check out the replay of our budgeting webinar to learn more.
3. Making only the minimum payments on credit cards. You only pay the minimum due each month, causing interest to pile up and debt to grow. You should always aim to pay more than the minimum on your credit cards—or better yet, pay them off in full each month. If you can’t, it may be a sign that you’re spending beyond your means.
The Fix: If you can afford to pay more but aren’t, reconsider your approach to avoid wasting money on interest. If necessary, consult a certified financial counselor to help you create a budget and debt management plan to tackle your debts.
4. Missing or making late payments. Even more than making just the minimum payments, missing payments entirely or struggling to pay bills on time can lead to late fees and serious damage to your credit score—a major financial red flag.
The Fix: Set up automatic payments or calendar reminders to ensure you never miss a due date. If cash flow is tight, revisit your budget to cut unnecessary expenses and build a cushion for essential bills. Taking proactive steps now can help protect your credit and financial health.
5. You have a high debt-to-income ratio. What’s a debt-to-income ratio? It’s simply the amount of debt you have compared to your income. If a significant portion of your income is consumed by making payments to debts, that can affect your credit score and be a sign that you’re spending too much. It's time to work on paying down those debts.
The Fix: Start by creating a realistic budget and prioritizing paying off debt. Consider strategies like the snowball method (paying off small balances first) or avalanche method (tackling high-interest debt first). If debt feels overwhelming, explore a balance transfer or debt consolidation loan for better interest rates. Check out the replay of our, "Paying Down Debt" webinar to learn more.
6. Your credit score is going down. This is a big, bright red flag! If your credit score is going down, that can have serious consequences down the road. It may mean that you have more trouble getting a loan, are subject to higher interest rates and can’t do things that you want (or need) to do!
The Fix: Check your credit report for errors and dispute any inaccuracies. Make timely payments, reduce credit utilization, and avoid opening unnecessary new accounts. Want to improve your credit? Register for our upcoming webinar on building credit.
7. You find yourself justifying purchases. If you find yourself justifying purchases — to yourself or others — or hiding purchases from a person, that should be a sign that you shouldn’t be making those purchases.
The Fix: Before making non-essential purchases, implement the 24-hour rule—wait a day to determine if you truly need the item. Creating a clear budget for discretionary spending can help curb impulse buying.
If you recognize any of these red flags, don’t hesitate to give us a call. Whether you need a fresh look at your budget, guidance on paying down debt, or expert advice on your next financial steps, we’ve got you covered. We really are just a call or a click away, and no matter what stage in life you’re in, we're here for you, for life. Talk to you soon!
