11 Signs You’re On the Brink of a Financial Meltdown

Before I headed off to college, my mother gave me a simple nugget of financial wisdom: “It’s not how much you make, but how you spend it.”

That wouldn’t be the last time I ran across that statement. Too bad I chose not to give it much thought until things got out of hand.

Once I landed the first job of my career as an accountant, I thought I knew it all. The dough was rolling in, and I was enjoying the fruits of my labors. But then life started happening, and my income was no longer enough.

When I finally stopped playing the blame game and looked within, I realized I never had it together to begin with. Having a handsome, steady income is one thing, but knowing how to make it work for you is another. Clearly, I’d failed at the latter by forgetting to plan for a rainy day.

If you’re wondering if your finances are spiraling out of control, here are a few warning signs to look for:

1. You’re living paycheck to paycheck

There’s no money in the bank, an unexpected bill has arrived, and you’re anxiously awaiting your next payday to bring the panic attacks to a halt.

2. You shuffle debt around

Simply put, you’re robbing Peter to pay Paul. You continuously find yourself advancing cash from one credit card or loan to pay on another one.

3. You’re unable to save

Each time a paycheck is deposited into your account, the money quickly disappears on outstanding obligations. There’s nothing left to set aside for emergencies or your retirement.

4. Creditors are beginning to call

It’s becoming impossible to keep up with your monthly obligations because your income simply isn’t enough, so you pay what you can and dodge the creditors’ calls until more income rolls around.

5. You’re afraid to check the mail

The collection notices roll in, and the constant reminders each day are disturbing, to say the least. As for the credit card statements, you rip up the explanation of the new charges and how long it will take to pay the card off, so you won’t have to agonize over how high the balance is.

6. You’re always paying late fees

No matter how small the bill is, there isn’t enough cash on hand to make timely payments. So you settle for the late fees and deal with any additional consequences, such as higher interest rates, that come with the territory.

7. Your credit score is plummeting

Because payments are being remitted after the grace period, which is typically about 30 days, delinquent accounts are now being reported to the credit bureaus. And you’ve made no effort to reach out to creditors to try to arrange a payment plan.

8. You continue to swipe away

Even if you’re strapped for cash, you continue to lean on the magic plastic to fund your poor spending habits.

9. You keep applying for more debt to get by

Now that your credit cards are maxed out, you resort to applying for additional cards and loans instead of reducing expenditures and searching for additional sources of income.

10. You have outstanding payday loans

As we discussed in a prior post, payday loans can wreak havoc on your wallet and credit if you exercise the option without having a plan in place to immediate pay it back.

11. You’re restless

Your finances are always on your mind, so much that you toss and turn at night. The thought of where things may be heading makes you sick to your stomach.

Now, how do you get yourself out of this mess? Take these steps:

Step 1: Face reality

The first step to cultivating a solution is admitting you have a problem. You can’t run from this issue forever, so it’s best to come to terms with the fact that your finances are falling apart and start taking additional steps toward a resolution.

Step 2: Calculate your income

Do you know the exact amount of money deposited into your checking account each month, or do you have only a rough idea? In order to get your finances on track, you’ll need to know the total amount you have to work with each month. And don’t forget to add any benefit payments or other miscellaneous cash deposits into the mix.

Step 3: Know where your money goes

You can’t get a handle on where your money is going until you track your spending. Only then can you identify areas that are in need of some cuts. We recommend PowerWallet, but there are other online spending trackers you can use as well.

You also need a spending plan. “How to Develop An Effortless Budget You’ll Stick To” will give you the momentum you need to get started.

Step 4: Adopt a debt management plan

Once you’ve taken steps to get spending under control, you’ll have extra money to begin a serious assault on your debt. Stacy explains how to reduce debt in this 2013 video.

Step 5: Start building up your cushion

Your spending plan should definitely include a line item for saving, preferably at the top of the list. Don’t think you can afford it? Check out “9 Ways to Build an Emergency Fund When Money’s Tight” and “21 Ways to Save $100 This Week.”

Step 6: Don’t give up!

When you want to throw in the towel, think about your biggest accomplishment, whether it was graduating from college or losing 50 pounds, and what it took to get there. Hard work and dedication were required. And there were probably a few headaches and periods of sheer frustration along your journey, but you made it.

The same applies on the road to becoming financially fit. The road will be rugged right out of the gate, but you’ll eventually look back and realize all your sacrifices and efforts weren’t in vain.