10 Financial Red Flags Everybody Must Know

Hey man, we need to have a talk about money. Not in the way professional bankers do in banking halls. But something real and deep that we can have over a cold bottle of beer. 

A report states that 67% of workers are living from paycheck to paycheck. This isn't another statistic. It's something that could be your reality or that of a close friend who asked you to check out casinos accepting Ethereum deposits for some blockbuster gaming action months ago.

But living from paycheck to paycheck is something you can avoid by understanding the financial red flags that scream “Houston, we've got a problem!” Let's take a look at them quickly. 

You just got paid on a fine Tuesday morning. But when it gets to Friday, you wonder where over 50% of your earnings have vanished to. Yep, that's one red flag that's waving so hard that it can break the pole it's connected to. 

If you can't sit back and think about how and what you spent your money on in the last week, it's just as if you're driving on life's financial lane with your eyes sealed shut.

Well, there's good news. You can free yourself from this web of financial irresponsibility. One valid way to do that is by downloading a budgeting app and tracking what you spend for the next 30 days. You'll be astonished by how many useless things you've been spending money on. That way, you can cut them out of your expenditure in the months that come next.

This scenario is one where every dollar and cent of your salary is accounted for before it hits your bank account. After you settle rent, utility bills, and food, you're left with a balance that's very close to zero. A Bank of America Institute report even states that households spend 95% of their income on the basics.

This scenario puts you in a cage and expenses that you never planned for can put you in debt. What you can do to avoid being in this scenario is to have an emergency fund where you save a small part of your earnings monthly. Don't be scared to start small. Saving $50 per month will accumulate over time.

It's fun opening a new line of credit and spending the cash on stuff that you need and don't need. But with most credit cards having interest rates that range from 15% to 20%, not paying them off on time can see you on the receiving end of debt that mimics a hydra.

So, do everything in your power not to treat credit cards like free money. The reality is that with their interests, they're not. And even if you use them to settle something important, make sure you pay them off on time. When paying off, start with those with the highest interest rates.

You've been working very hard for months. The higher-ups at the office take note of your dedication and give you a promotion that includes a 20% salary raise. 

But instead of putting that extra cash in a savings account, you use it for stuff you don't need. All of a sudden, a fancy dinner, a Cartier watch, and front row seats at a basketball game start to tickle your fancy. 

This is called the lifestyle creep. And if you're not careful, you could be back to square one once you lose that job. To fight these selfish desires, send extra funds to a high-yield savings account once you're paid. You'll be glad you did months or years down the line.

If you're in your 30s and 40s, you might think that you can delay saving for retirement for years. Are you in this spot? If yes, we need to have a serious chat about your life.

When you put money in a retirement account, you would get what's known as compound interest. On the surface, this is exciting. But you've got to know that this interest will only compound into huge money when they sit there for a long time.

The longer you wait to create your retirement savings account, the more funds you'd need to catch up. 

Don't worry if you can't max out your 401k, just start saving right now. And if the company you work at offers a decent retirement contribution, take it. That free cash will help you live a fulfilled life long after retirement.

Everywhere you look, you'll find Buy Now, Pay Later (BNPL) services popping up. This isn't surprising as they let you get the stuff that you need without needing to pay its amount upfront. Instead, you can spread payment across a particular period.

This makes sense. But when you've got 7 or 8 BNPL plans running at once, your finances will become a mess. When you default payment, what you owe increases, increasing your debt in the process. If you can't afford to buy something with your own cash in one go, save until you can conveniently purchase it.

When you live above your means, the money you have in hand might finish eventually. And if you want to keep up with appearances, you might start borrowing from friends and family.

Make sure that you live within or below your means because there might come a time where you borrow money from the wrong person or organization. And when you can't pay back, you could lose something valuable to you (i.e., your car or house).

Got car repayments? Student loans? Mortgages? And you're not concerned about how you're going to pay them off? Pretending you aren't in debt doesn't mean it'll go away.

To avoid getting into a situation where you're given penalties to repay debts, create a list of what you currently owe. After you've done that, make a plan on how much you intend to clear each week or month, as your payment schedule allows. If you stick to this plan, you'd be able to settle all your pending debts. It might take time, but you'll heave a sigh of relief when you're debt-free.

It's a red flag if you're just living life without having a single plan about your future. Agreed, you might have dreams of driving a Lamborghini Urus, buying a luxury mansion, and sending your kids to the best schools in the country. But if you don't have a financial plan to back them up, these daydreams will never become a reality. 

But it's not too late to have a plan. Where do you see yourself financially in 5 to 10 years? Write it down and do what you can to get there. This might involve getting a job or a degree. Either way, you can get it done. We're rooting for you.

This one is more about your mental health. 

If your financial situation keeps you up at night, if a bill makes you sigh heavily, and if you're scared of looking at your account balance because the digits there get you depressed, that's your body telling you that you need to change something.

Financial anxiety doesn't affect your mental health alone, it has a negative effect on your relationships and work. If things get too overwhelming, talk to a therapist. You deserve better than constantly worrying about where you are financially.