Unless you do a strict accounting of your income and expenses each month, you won’t know whether you are living within your means. Below we have compiled a list of red flags that may indicate that your finances are not under control.  If any of these apply to you, it may be time to pause and take a closer look at your spending habits.

You Only Pay The Minimums

Let’s not be in denial about this one. Your credit cards should rarely even be used for credit. Their main purpose is to increase your credit score by enabling you to build a strong payment history. Their secondary purpose is to gain you those points, rewards, cash back and other benefits that card issuers provide.

If you find yourself in a financial emergency and you need to use your credit card, pay it off as soon as possible. The interest rates on credit cards can be over 20% depending on your credit.  If you aren’t able to pay that card off, you will be paying quite a bit in interest.

You Don’t Have Sufficient Savings

Financial experts agree that the average household needs to have at least six months’ worth of their average income held as savings to protect against unexpected emergencies. If you don’t have half a year’s income saved up, that is a red flag that your expenses may be outpacing your income.  This means it may be time to tighten the belt.

You’re Robbing Peter To Pay Paul

Well, in this analogy you are both Peter and Paul. If you are juggling bill payments, selecting who shall be paid and who shall be asked to be patient, you’re already in trouble. While an emergency may throw your finances out of whack, that is what an emergency fund is for.

Your Total Debt Payments Are Over 20% Of Your Take-Home Pay

This rule of thumb excludes mortgages, which may be classified as an investment. Generally speaking, if a fifth of your paycheck is going towards paying off debt, you are likely not living within your household budget.

Other Signs of Excessive Debt

There are other signs besides the ones listed above that will tell you if you are spending too much.  Are you using your credit card to pay for necessities? Did you refinance a loan to reduce your monthly payment? Do you need a co-signer on loans due to a low credit score? Are you financing your vehicle for a period of six years or longer?  If the answer to these questions is “yes,” the red flags are flying, and it is time to pay attention to them.

Finding Your Way Out

The road out of excessive debt is usually a long one.  With that being said, it can also be an instructive one leading to a lifetime of careful financial planning and activity. If it makes sense for your situation, consolidating your credit card debt on a card that does not charge interest on balance transfers.  Once your debt is on that new card, pay it off before the promotional no-interest period ends. Keep in mind, you still will need to cut expenses and stay within a budget.

Money Management Is Key To Financial Health

Going for a leaner lifestyle is in reach for anyone.  It will require that you take stock of how you spend your money and cutting back where you can.  This may look like revisiting your smart phone data plan, getting rid of your cable TV and doing away with lunches and dinners out.  That may sound disappointing but getting your finances in order will allow you to enjoy more without worrying about your finances. You’ll be surprised at how quickly you stop missing items that you previously considered necessities.