A recent MSN Money article discussed seven warning signs that your finances might need help. These items included:
- 1) Regularly missing bill due dates
- 2) Opening more lines of credit
- 3) Making credit card payments with other credit cards
- 4) Not contributing to a savings account monthly
- 5) You’re unaware of your credit status
- 6) No reserves
- 7) Paying bills with a retirement account
Our family has taken several critical steps to ensure that we avoid any such financial warning signs.
Reducing our number of expenses and credit cards
Reducing the number of expenses we have kind of goes hand-in-hand with cutting the number of credit cards we use. There seems to be a correlation between credit cards and costs, and we’ve found that by eliminating the number of cards we have, we also eliminate the temptation for greater spending.
This helps us with several of the financial warning sings listed above, namely numbers one, two, three, and seven. Without as many costs and bills arriving, we don’t miss regular bill due dates. With lower regular expenses there’s no need to open new lines of credit. Since we only have one credit card, there’s no temptation to use another card to pay this one down. And due to our lower number of expenses, we’re not paying bills with a retirement account.
Building and maintaining a regular emergency fund
But even with good planning and cost-cutting, sometimes situations occur in which it makes it difficult to handle regular financial responsibilities. A job loss or income reduction, unexpected major expense, or a health situation could leave us vulnerable to numbers one, four, and six on the aforementioned list. This is why we ensure that we not only fund a reserve account, but we build smaller reserve funds into each of our monthly budgets. Again, having even small amounts – just a hundred dollars or so – available each month as a reserve buffer can help us avoid missing unexpected bills and utilize any surplus to fund our larger reserve account and/or contribute to a savings account.
Finally, there is the issue of credit monitoring, which in our high-tech world and with increased dependence upon the internet as a financial tool, seems to be becoming more and more important. To help us combat this issue, we pay a nominal fee to have our credit monitored. We receive regular credit score updates and have easy access to credit reports and similar credit-related options and activities, which makes getting updates and looking for potential issues quick and easy.
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The author is not a licensed financial professional. This article is for informational purposes only and does not constitute advice of any kind. Any action taken by the reader due to the information provided in this article is solely at the reader’s discretion.