21 Signs You Need Help Managing Your Money
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"Last year, 25 percent of Americans missed a credit card payment and paid more than $77 billion in penalties -- ouch!" said Kimmie Greene, head of communications for Mint, a financial management company that helps consumers with budgeting and bill paying. "That’s money that could otherwise have been used to pay off debts, save for the future or go on a dream vacation."
Related: 15 Ways to Increase Your Income
Luckily, money management is a skill that anyone can learn. However, the first step is admitting you need help. If the following statements ring true, you might have a money management problem.
(By Nell Casey)
You worry your card will be declined.
If you’ve ever stood in line at the supermarket mentally subtracting the cost of the items in your cart from your bank balance, then you might just need a little help with your money. Worrying about being able to pay for essentials could indicate you don't have control over your finances.
"So, as people are looking for ways to take the work (and worry) out of staying on top of their money, paying bills on time is an important first step," said Greene. "Doing so makes it a lot easier to stick to a budget and save for the future.”
Use a money management app like Mint to stay on top of your transactions and bank balances. Your spending is updated in real time, and you can instantly see how much money you have available with a quick glance at your phone.
Your card is declined regularly for purchases.
Your bank balance is less than $100.
If you have sufficient funds left in your bank account just days before payday, congratulations. But if you’re regularly finishing up the month with $100 or less in your account, that could be a sign that you need to learn how to manage money.
If so, you're in good company. A recent GOBankingRates survey found 49 percent of Americans are living paycheck to paycheck. If this is you, it’s essential that you put aside some of your cash as soon as it hits your account. Depositing money into an emergency fund to save for unexpected expenses is a good place to start.
You’re not saving for the future.
It's great that you’re dutifully saving for your next holiday or a new car. However, it’s also important that you save for those longer-term goals, like a new house or your retirement.
According to GOBankingRates' 2017 Retirement Savings survey, more than 50 percent of Americans are on track to retire broke. Further, 55 percent of U.S. adults have less than $10,000 saved for their golden years.
The fact is, the earlier you start saving for retirement, the better your financial position will be when the time comes. A financial planner can help you create a plan to reach your retirement savings goals.
You only save what’s left at month’s end.
You’re putting money into an investment or retirement account. But how much you set aside depends on what you’ve got left in the bank at the end of the month. Sometimes it’s $200, sometimes it's $20.
Saving for your future should be a top priority when you get your paycheck, along with paying rent and other necessary expenses. Some experts recommend saving about 13 percent of your gross income. If that seems unattainable, start with 5 percent and work your way up. If you still don't know where to start, here's how much you should have saved at every age.
You tap savings for daily expenses.
Even if you’re dutifully saving money each month, regularly drawing on those funds to pay for daily expenses will slow down your savings growth. It could even cause you to slip backward.
“Oftentimes, as people set up budgets, they do so with an ideal world scenario in mind -- one that often requires more restraint than is realistic," Greene said. "So, people should consider tracking expenses for one to three months at the start to see where their money is going. And with that information, establish a budget that is highly personalized, including some unspeakables, such as avocado toast, fresh-pressed juice or a tried-and-true latte habit."
Additionally, you should analyze why you need to access your savings for non-emergencies. Are you trying to save too much, leaving you short in other areas? In that case, reduce how much you save and commit to not accessing those funds. Are you regularly receiving big bills for which you haven’t budgeted, such as annual auto insurance? Budgeting tools like YNAB (You Need a Budget) can help you figure out how to avoid getting surprised by bills.
You carry a credit card balance.
Carrying a lot of credit card debt is a sure sign that you need help managing your money. According to a 2016 survey by GOBankingRates, the median amount owed by individuals with credit card debt was $2,000. However, the amount of debt rises with income levels. In fact, the median balance carried by those in the $100,000 to $149,999 income bracket was $6,944.
If credit card debt is a serious issue for you, seek help from a financial counselor who can provide money management tips to help you pay it off. Perhaps an advisor can help you negotiate with your creditors to reduce your interest rate.
You haven’t thought about your ideal retirement scenario.
You’re planning your retirement.
If retirement is looming, you’re likely dreaming of European holidays, days spent with the grandkids and taking up hobbies. One thing you surely don't want to do is reenter the workforce in your 70s due to insufficient savings.
If you’re nearing retirement and you haven't done so already, sit down with a financial planner to ensure that you’re on track and socking away enough cash to retire comfortably. How you save and manage money in the 10 years leading up to retirement can mean the difference between taking exotic cruises and watching "Love Boat" reruns.
Additionally, a financial planner can help ensure that you're making the most of what are often your highest-earning years.
You’ve lost track of investment accounts.
According to a 2016 survey by the Associated Press-NORC Center for Public Affairs Research, 40 percent of baby boomers have remained with their employers for two decades or more. Given millennials' penchants for job hopping, the younger generation will likely have worked in far more roles by the same age.
Frequent job hopping raises the possibility that you might forget about your employer-sponsored retirement plans or investment accounts. Even if you think it’s not worth chasing an account worth a few hundred dollars, consider that in 35 years the earnings on those funds could be a significant boost to your retirement savings.
Visit the National Registry of Unclaimed Retirement Benefits to find out if you have lost or missing funds.
You track spending but lack growth.
You switch between budgeting strategies.
If you’re constantly pinning budgeting tips on Pinterest and creating new budgets, then you likely need help with money. Just like yo-yo dieting often leads to weight gain, constantly switching your budgeting method could leave you with bigger debt.
If you’re finding it hard to stick to a budget, seek assistance from a professional who can help you stay on track, be accountable and grow your net worth.
You take out personal loans to make purchases.
Have you been sucked in by those late-night television commercials promising cash for a tropical holiday at a low rate?
Personal loans are appropriate to consolidate credit card debt at a lower rate, to pay medical bills or to cover other expenses you couldn't afford otherwise. But using them to treat yourself to a new wardrobe or pay for cosmetic surgery is just another way to go deeper into debt.
Before you consider taking out a personal loan, chat with a financial planner to see if better options exist.
You earn more and spend more.
You received a windfall.
An inheritance or sudden windfall promises opportunity -- unless you get careless and follow in the footsteps of lottery winners who end up broke years later. Rather than letting your emotions fuel your spending, turn to an advisor and an accountant to make the most of the cash.
Your life situation has changed.
You don’t understand your investments.
If your financial statements are confusing and you’re not certain if your investments are growing -- or you're unclear about the fees you might be paying -- find a financial professional to help you sort it out.
Even the man some consider to be the best investor in the world, Warren Buffett, advises against investing in a business you don’t understand (think Bitcoin). A good financial planner should be able to explain clearly what you’re investing in, the expected returns and the risks involved.
You’re fearful of a stock market crash.
Does roller coaster stock market volatility keep you up at night? Investing involves a certain amount of risk, but you should keep in mind that stocks have historically performed very well as investment vehicles. And if you're in your 30s or 40s, time is on your side to recover losses.
But if your concerns are deep, seek a professional to manage your investments and make recommendations based on your age and goals. You can invest more aggressively in your younger years and gradually become more conservative as you near retirement.
You’re stressed about debt.
If you flinch every time the phone rings or avoid opening your mail because you assume it’s another debt collection effort, you aren't alone. According to GOBankingRates' 2016 survey on financial stress, paying off debt was the No. 1 worry among respondents in all 50 states and D.C.
A financial counselor can work with you to make a plan to tackle your debt, which will help you feel empowered about your financial situation.
You’re worried about funding your kids’ education.
Higher education costs continue to soar, outpacing inflation and wage growth. According to the College Board, the average price of in-state public college was $24,610 in 2017, while private school rang in at a whopping $49,320.
It's best to start saving for your kids' education early. Check out state-sponsored and institution-based college savings plans, and ask a professional which option might suit you best.
You have no estate plan.
According to a 2017 survey by Caring.com, just 40 percent of Americans have a will or living trust.
When you die without a will, the laws of your state determine how your property is distributed. This includes bank accounts, securities, real estate and other assets. As a result, dying without a will has significant legal and tax consequences for your family.
Consult a financial planner, an accountant and an estate lawyer to advise you in this area and ensure your family members get everything they deserve once you're gone.