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Last week I devised a plan for helping people emerge from debt. But what if you don’t even realize you have a problem? It may take a few moments to examine your entire money situation in order to recognize whether poor money management issues are causing you to slowly sink into a sea of financial trouble.

There are certain telltale signs of how people stretch their dollars beyond reasonable limits. If one or more of the following examples applies to you, view it as the perfect opportunity to make a change. Your wallet will thank you later.

1. You have an adjustable rate mortgage or home equity line of credit.

This where a lot of Americans have run into trouble. While your monthly payments may be initially lower due to the adjustable interest rate, if those rates rise significantly (which is a real possibility), then you could be stuck with a payment you simply can’t afford. Since interest rates have been low for quite some time, homeowners haven’t been as focused on this risk. It’s a good idea to assess whether you would be financially overextended if dramatic interest rates should occur, however. Read my recent blog on refinancing your mortgage for options on how you can remedy this situation.

2. You’re purchasing big ticket items with with or no down payment.

The “buy today, pay tomorrow” philosophy is certainly a tempting one; especially if you don’t have the money up front. But making a habit out of buying items like cars, furniture, or home appliances without contributing a dime toward a down payment can be a dangerous road.

Long-term payment plans mean you’ll spend significantly more in interest than you would if you had initially saved up for a respectable down payment (10-20% is a good range).

If you’re purchasing merchandise that has a interest free period for its financing plan and you can easily make the payments within that window of time, then it may make sense to hold off on a down payment. It’s a good idea to automate your monthly contributions, however, to ensure you actually pay things off in a timely manner.

3. You make excuses for not contributing to your retirement account.

Perhaps you have a lot of debt that you’re trying to pay off before you start regularly contributing to your 401(k). While it’s good to get your debt under control, it’s also vital to save for the future–especially if your company matches the funds you contribute.

Here’s a few ways to stop making excuses and start saving:

  • Set up a monthly automated transfer to your savings account in order to accumulate up at least a month’s worth of expenses for emergencies. That way you won’t be using credit cards to pay for unexpected necessities that come up, such as car repairs or medical bills.
  • Stick to a monthly budget (click here for help with creating one).
  • If you know you can set enough money to pay at least the minimums on your debt every month (and preferably more on debts with interest rates of higher than 6%) plus spare some for retirement, then do what it takes to get your company retirement match. Even if you have debt, it’s worth it to divert dollars you could put toward your debt into your 401(k) — plus, you’ll get a tax break for it.
  • If you can’t afford to set aside money to obtain the company match, cut expenses from your budget, or earn more money to do so.

4. You’re struggling to pay your monthly expenses.

While it may seem like an obvious issue, you may not view it as something you should try to change if you’ve had trouble for an extended period of time. You may see your struggles as something temporary that will improve once you get a new job or a promotion.

If you aren’t paying your bills on time, you have plenty of company: Twenty-four percent of Americans, are constantly late with their bills, according to a recent financial survey.

But just because you’re not alone in your struggles doesn’t mean you shouldn’t do something about it. Late fees and bank overdraft charges add up quickly, and they can also affect your credit score. Think twice before you purchase any additional merchandise that will result in monthly payments you can’t afford. Again, sticking to a budget can help you quickly climb out of financial troubles.

5. You’re overspending on your credit card.

Racking up more charges on your credit card each month than you can pay off is a vicious cycle that can result in mounting debt. The bigger the hole gets, the harder it will be to fill it in and come out in the black each month.

According to the National Foundation for Credit Counseling’s 2014 Financial Literacy Survey, which surveyed 2,016 adults last March, approximately 15 percent of adults, more than 35 million roll over $2,500 on credit cards from month to month.

But again, you shouldn’t feel better about your own situation just because you have company. Instead, stop using all credit cards and work on paying them off. Start with your highest interest rate card, contribute every extra dime toward your debt while paying the minimums on the others, rinse and repeat.

Bottom line: If you’re struggling with any of the above items, you could be financially overextended. But luckily there’s a way out if you’re diligent and persistent in cutting back, paying down debts, and saving what’s left.

Author Ron L. Brown, CFP®

Ron is a CERTIFIED FINANCIAL PLANNER™ and President of R.L. Brown Wealth Management. He specializes in retirement, estate, and business planning for professionals and entrepreneurs. Ron assists his clients with creating a financial plan to ensure they are able to live their ideal lifestyle during retirement and leave a strong legacy for their family. Ron has been featured in The Wall Street Journal, US News, Yahoo Finance, Investopedia, and numerous other high profile financial publications.

More posts by Ron L. Brown, CFP®
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