You get a physical every year to make sure you're in good physical shape; take this test to ensure you're in good fiscal shape.
Whether it’s your physical health or your financial health, it’s important to watch for signs of potential trouble ahead.
Feeling blue more often than you should? You could be suffering from depression. Nose running? Could be allergies. Is that cut on your arm turning red and puffy? That’s a sign of infection.
Not opening the mail or only making minimum payments on your credit cards? You could be on the verge of a money malady.
Here’s a story Stacy recently shot listing a few signs you may be heading for financial trouble. Check it out, then take the test that follows:
Now you’re ready for the test to see if you could be heading for a debt disaster. If a statement doesn’t apply to you, skip to the next question. All you have to do is keep track of the number of statements that fit.
1. I make minimum payments.
Minimum payments are designed to maximize profits for lenders, not you. If you’re only paying the minimum, odds are you’re living beyond your means.
2. I regularly pay bills late.
We all occasionally space out. But if you’re missing payments because you don’t have the money, that’s a very bad sign. And if you’re missing them because you space out, enroll in auto-pay.
3. I move debts from one lender to another.
Moving a debt from a high-interest credit card to a zero-interest one can be a sound strategy. But engaging in a shell game by moving balances from one lender to another is dangerous. Don’t dance with your debts; pay them off.
4. I need overtime to make ends meet.
This is a sure sign you’re spending more than you’re making. What will you do when the overtime dries up?
5. I’ve taken money out of a retirement plan to pay bills
To buy a house or finance an education? Maybe. To pay bills? A sure sign of hot water.
6. I’m borrowing from family and/or friends.
Shakespeare nailed this one in Hamlet: “Neither a borrower nor a lender be, for loan oft loses both itself and friend…”
If you’re doing it often, why?
7. I’m taking it to the limit.
Hitting the max on your credit cards not only creates higher debts, it creates lower credit scores. Your credit utilization ratio – what you’ve borrowed compared to your limits – is part of your credit score. You should never max out your cards.
8. I’m taking whatever I can get.
If you immediately accept any type of loan with no regard to rate and terms, you’re desperate. Credit cards and loans are like anything else you buy – shop for the best deal.
9. I use the cash advance on my credit card.
Cash advances often charge 20 percent or more and offer no grace period, so you immediately start accruing interest. Only when your back is against the wall should you accept horrible terms like that.
10. I don’t know what I owe.
Quick: How much do you make? Now: How much do you owe? Odds are you knew the answer to the first question. If you couldn’t answer the second, you’re not paying close enough attention.
11. I don’t have a plan to become debt-free.
Paying interest means giving money to a lender that should be used to achieve your goals. Sometimes we have no choice, but we should always have a plan to take debt to zero.
12. I’m not contributing to a retirement plan.
There are only two valid reasons not to contribute to a retirement plan, especially if your employer is offering free money in the form of a match: 1. You absolutely don’t have the money, or 2. You intend to die before retirement age.
13. I use payday loans.
As we’ve said in articles like More Proof That Payday Loans Suck, paying 400 percent interest to borrow money is a sure sign of desperation and a great way to dig a debt hole deeper.
14. I’ve been turned down for a loan.
If you’ve been turned down for a credit card or loan, your credit score isn’t where it should be, or you’re trying to borrow more than you should. Neither is a good sign.
15. I overdraw my checking account.
Nearly everyone has accidentally overdrawn their checking account at some point, but if you’re making a habit of it, you’re either not managing the account well or your bills are bigger than your paychecks.
16. I put off paying bills.
If you’re earning 20 percent on your checking account, keep your money as long as possible and pay your bills at the last minute. If you’re earning next to nothing, however, the only reason you’d leave unopened mail lying around is because you’re disorganized or afraid of what’s inside. Neither is good.
17. I’m a sub-prime borrower.
If your credit score is below 620, according to Equifax, you’re sub-prime – a sure sign of past trouble. If it’s on the rise, great. If it’s not, is there more trouble ahead?
18. I often fight with my partner about money.
While the occasional disagreement is inevitable, if you’re continually fighting over money, both your relationship and your finances could be in trouble.
19. I don’t have an emergency fund.
If you don’t, you’re one car breakdown, busted appliance, or vet emergency away from debt.
20. I’m staring at the ceiling at night.
Everyone occasionally worries about money, but if you’re often worried to the point you can’t sleep, there’s probably a reason: You’re either living beyond your means or not making enough to support yourself.
21. I’m not the budgeting type.
While failing to track your expenses isn’t a sign of impending doom, paying attention to what you’ve got coming in and going out makes it much more likely you’ll reach your goals and see trouble on the horizon long before it reaches you.
22. I’m under-insured.
Skimping on necessities like insurance is a sign you’re robbing Peter to pay Paul.
How to score yourself
Just as a runny nose isn’t always a sign of allergies, agreeing with a statement or two on this test isn’t a sign of an impending debt disaster. For example, if you’re on solid financial footing, but don’t keep a budget, you’re obviously not in trouble. Likewise if you transfer a balance from a high-interest card to a zero-percent card to pay it off faster, or borrow from your IRA to buy a house.
But if you can agree with more than three of the above statements, you’re likely on shaky ground. If you can relate to more than six, it’s nearly certain.
Sometimes dealing with debt and other financial problems only requires vigilance: Use sites like our partner, PowerWallet, to set financial goals and automatically track your expenses. If that won’t do the trick, get professional help. Fortunately it’s available free; check out stories like Where Can I Go for Help With Debt?.
Are there other signs of financial trouble we left out? How did you score? Tell us your thoughts below or on our Facebook page!