Eight Financial Red Flags

If used responsibly, personal loans can be a practical solution to short-term financial difficulties. However, if you recognize any of these red flags, you might be headed for financial disaster.

1. Your bank and credit card statements surprise you. Your bank account balances and credit card statements should not come as a surprise to you. You should be monitoring your spending either with a budget or online account management to avoid any unpleasant surprises with your finances.
2. You don't save. Not saving is a surefire way to become dependent on personal loans. One unfortunate event could leave you scrambling if you do not have a buffer on which to fall back. Make a goal of saving up at least three months of living expenses.
3. You have credit card debt. Many people who turn to personal loans already have a considerable amount of credit card debt, and this is costing you an obscene amount in interest. Pay down your balances as much as possible each month.
4. You have no cushion. If you spend every last cent that you earn each month, then you have no discretionary income, which is a precarious situation to be in. Look for ways to trim your expenses so you make more than you earn. This simple strategy can help you avoid a need for personal loans.
5. You're clueless about your mortgage. You should know your mortgage inside out-what kind of loan it is, when your payment resets, and what your remaining balance is. If your mortgage interest rate is about to reset, you might be ambushed by higher payments and interest rates.
6. You're inadequately insured. Not carrying enough insurance is extremely dangerous. One disaster or mishap could devastate you financially if you don't have enough coverage. Protect your assets by carrying sufficient insurance.
7. Your business is struggling. If you own your own business and it is losing money, you risk not only your business failing but also damaging your personal finances if you are using your credit to keep the business alive. Set a deadline for your business to become profitable again, and, if it doesn't, then pull the plug.
8. You're ignoring the problem. Most people who chronically need personal loans have some financial problem that they aren't facing. Maybe you have a car loan that you are struggling to keep up with. Perhaps you are retired and your savings are diminishing faster than you anticipated. Whatever the problem, acknowledge it and figure out a way to fix it.