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Do you know if you are heading for financial disaster?

I knew I had problems but thought I would be OK. I mean, that sort of thing happens to other people, not me. Right? I figured I’d sort something our or something would come along to change where I was heading.

This wasn’t a fun way to live, let me tell you. I mean, I was living from pay check to pay check, always hoping I’d find whatever money I needed to pay the bills. Like I state on my About page, I was in debt and living a life that didn’t satisfy me. I wish I knew then what I now know; life would have been so much easier!

Of course, I wasn’t alone but that wasn’t much comfort, I can tell you! Statistics show that nearly one in two Americans are in serious financial problems due to their debt levels. This shows that the problem is really widespread.

To help you identify where you might be going wrong, we’re going to look at some of the more common financial mistakes people make. If you identify that you might be heading for financial disaster like I was, we’ll give you strategies to turn things around.

10 Reasons Why You’re Broke  If you always seem to have more month than cash, then it’s time to look at why. See if you can identify with any of these statements:

• I spend more than I earn
• I don’t have a household budget
• I use credit cards all the time to buy everyday essentials like food, gas, transport.
• I use store cards to get the specials
• I don’t track what I spend my money on
• I don’t have an emergency fund
• I don’t regularly save anything from my wages
• I don’t have a retirement account yet
• I only pay the minimum amounts on credit cards
• I have numerous credit cards
• I often make credit repayments late
• I spend ‘windfalls’ rather than save

Or, how about impulse shopping?  Do you have items in your house that you never use? Do you buy things you didn’t know you wanted until you saw them in the store?

What about signs? Can you see any of these in your financial affairs?

• Bills that are overdue – this is a classic early sign that you are in trouble
• “Robbing Peter to pay Paul.”
• Difficulty meeting basic family needs
• Counting on tax returns or pay increases to ease your financial situation
• Lying about spending or anything else to do with finances.
• Saying things like ‘we’ll find a way to pay for it’; ‘it’ll be right, we’ll manage’; ‘I’ll borrow if I have to’.

So, how did you do? Did you find anything that applies to you?

Identifying problems is the first step to correcting your financial direction. The second step is to make some changes. The sooner you take action to alter your path, the better. Continuing as you are at the moment is a recipe for disaster, so lets give you a recipe for success.

Create a Budget

If you don’t have an up-to-date budget, create one. This was the first step for me.

If your budget doesn’t balance, find ways to cut your spending or increase your household’s income. Look for where you’re spending on non-important things. Cut a bit from several areas rather than a big amount off one.

If your budget doesn’t have a savings amount, put one in. Adjust your spending if you have to. Also include an emergency fund and contributions to a retirement account, even if just small amounts at first.

Pay with Cash

Start to pay cash for living expenses. When you buy everyday items with a credit card and then don’t pay off the full balance each month, you are buying very expensive food and gas.

Avoid using store cards; they usually have excessively high interest rates and this negates any savings you might make.

Pay Bills On Time

Use your budget to help you make every payment on time. This eliminates the expense of overdue fees. Always pay more than the minimum on credit cards, even if just a few dollars; this will save you money in interest.

I also find scheduling payments either online or with a teller at your bank works great at avoiding late fees and added interest. I do this with all of my bills and it works great.

Slash Your Credit Cards

Start getting rid of the credit cards. Stop using all but one or two; make all the minimum repayments and throw as much extra onto the smallest balance until it’s paid off. Repeat with every card; cut them up and close the account when the balance is zero.

Be Honest

Above all, be honest about your financial situation. This was hard for me. I had to admit that I had a problem that needed fixing. None of us like telling ourselves we made a mistake but that is life. Deal with it.

Talk to your partner and even your kids if they are old enough to get the concept. Ask for everyone’s cooperation to help get your financial problems turned around. Stop making excuses, don’t justify your situation and avoid adding more debt into the mix.

Bottom Line: If you have identified any signs that you are heading for financial disaster, you now have no excuse for failing to take action. Never ignore any of these warning signs. Take immediate action, even if it starts out as small baby steps. Once you start to turn things around, you will find the momentum with gather and it will become much easier.If you ignore these warning signs, it will be you who is to blame when things get worse. And they will get worse if you don’t take action now.

So, what is the status of your financial situation? Are you headed for disaster? Or, if you are on the right track, what did you do to get there? What strategies did you find helped you avoid financial disaster?