The joke—and it’s an old one—goes like this: Fred receives a windfall of $1,000. He asks a friend what’s the best thing to do with his money. “Open a checking account,” his friend said. “Then, whenever you need some money, you just write out a check.” Fred thinks that’s a great idea and does exactly that. A few weeks later, he receives a letter from the bank saying, “You have an overdraft of $273.” So Fred goes in and meets the bank manager
“What’s an overdraft?” Fred asks. “Well, I’ll keep this straightforward. It means you owe us $273,” the banker replies. “No problem,” Fred says. “Do you accept checks?” The story is good for a laugh, but we’re actually doing what Fred tried to do every time we extend our credit a little more. We’re sinking deeper and deeper. Keep your family’s head above water by watching out for these 5 financial red flags that can sink your family.
1. You have no budget.
If you’re saying, “What’s a budget?” that’s an extra red flag! Do you know how much you earn? Do you know how much you spend? Is there a plan? You have to address these questions to give financial peace even a chance. There’s a cliché that applies here: “If you don’t know where you’re going, you’ll probably end up somewhere else.”
If you’re not satisfied, it’s a sign you’re pursuing the wrong treasure.2. You find yourself agreeing with the commercials.
Do you want everything you are told you need? Are you tempted to agree that “more” will satisfy? If you’re not satisfied, it’s a sign you’re pursuing the wrong treasure. More of something that doesn’t satisfy is never going to be enough. It’s time to reevaluate.
3. Your credit card balance is going up, not down.
Try this simple equation: Always pay what you spent the previous month, plus one-twelfth of the balance. It’s a great way to drive the balance down. If that sounds too hard a plan, then revisit the second point above.
4. You and your family argue about money constantly.
If money has become a relationship issue, then you’re running too close to the wire. Marriages and relationships with your kids don’t benefit from that level of stress. If there are any questions regarding expenditures, then see the first point above.
5. You “can’t afford” to give to your church or favorite charity.
Many times, we plan to be generous “when the money is better.” The ability to give is more than a convenience—it’s critical for a balanced life.
Sound off: What other red flags can you identify?
Huddle up with your kids and ask, “What is one thing you wanted to buy in the last year? Did you have the money? Why or why not?”