4 Signs You Could Be Headed for Financial Problems

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It seems to me that much of the reason many people are in so much personal financial hot water these days is that they don’t understand the warning signs that indicate they could be headed for financial problems.  For years Rick and I would tell ourselves that we were fine financially.  After all, we could easily make our payments, everyone has debt, our income will only go up, blah, blah, blah.

It was only in the years after Rick’s layoff and him taking a lower-paying job that we learned there were plenty of red flags waving in our midst, trying to tell us that we were walking on thin financial ice.  Today I’m sharing four of the most prominent signs that might signify to you that you could be headed for financial problems, hoping to help others avoid ending up with the financial problems we found ourselves facing in 2012 and are now digging ourselves out of.

You Don’t Know Your True Financial Picture


Before our money wake-up call, we had very little idea of our overall financial picture.  Honestly, we didn’t want to know.  We didn’t want to have to look in the mirror and face up to our overspending, our lack of savings, and our growing debt load.  It was easier just to stick our heads in the sand and keep on making those minimum payments, so that is what we did.

If you aren’t currently aware of your true and overall financial picture, make sure it’s not because things are heading for a major money breakdown, and then make a commitment to educate yourself about your current financial problems, which may include your debt load, savings amounts, retirement amounts and the like.

You’re Overconfident with Your Current Financial Situation


We made this major league money mistake as well.  We just figured that because we were comfortably making our minimum payments, we were doing fine (i.e. we had no major financial problems).  We often compared ourselves to others, as in, “We’ve got WAY less debt than so-and-so.”  “So-and-so spends WAY more money than we do.” We had convinced ourselves that the mess we were sitting in really wasn’t that bad, so therefore we could keep being irresponsible with our money.

If you are feeling more confident than you should about your major debt load or lack of savings, it’s time to face the facts, my friend.  You deserve to know the truth about your current money situation.

You Don’t Have Monetary Goals


A lack of having a goal ensures you’ll miss it every time.  If you don’t have a set purpose for every dollar that comes into your pocket, you’re much more likely to blow it on stupid, useless stuff.  Without a purpose for your money, you’re setting yourself up for financial failure every time, because a lack of purpose for money often breeds a lack of respect for it.  Take some time to write down what your monetary goals are, and give your money a purpose.

You Don’t Have the Right Attitude About Financial Problems


This was another area in which we failed miserably in our finances.  We mistakenly believed that if a major financial problem like a financial emergency came along, we’d figure out a plan at that time.  Then, when the emergency came in the form of Rick’s layoff, we muddled through just fine as we scrambled to sell things, etc.  However, when he took his new job at 80% of his previous pay, we blew that off as a financial non-emergency.  We just “wisely” figured we’d put everything over and above what we could pay for onto credit cards until his pay caught up to his previous income.  We didn’t view this 20% drop in income as a financial emergency.  Clearly, though, we should have, as we were conveniently living paycheck-to-paycheck on his old salary.

I’m a big proponent of a positive attitude, but sometimes a positive attitude is a cover-up for not facing the facts, and that can lead to serious financial problems.  Make sure your “we’ll be just fine” attitude isn’t misaligned with the truth about the financial emergency you’re facing, or could be facing at any time.  Make a plan today that will help you to be financially prepared for things such as job losses or unexpected major expenses.

If after reading this article, you have found yourself falling prey to any of the above financial warning signs, give yourself a big kudos for recognizing that fact.  Then, put a plan in place today to turn your financial picture around and conquer those warning signs, turning them from problems into victories.


What other warning signs can you think of or have you seen in a person’s life that might indicate they’re headed for financial problems?


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Laurie is a wife, mother to 4, and homesteader who blogs about personal finance, self-sufficiency and life in general over at The Frugal Farmer. Part witty, part introspective and part silly, her goal in blogging is to help others find their way to financial freedom, and to a simpler, more peaceful life.


  • I’ve lived with not knowing our true financial picture, and it’s definitely not a good sign. “Hey, I just figured out the true state of our debt, and it’s WAY BETTER than I thought” <—– Said NOONE EVER!

  • I know someone that lives like a one day millionaire type, every time when he got his paycheck, he goes to an expensive restaurant, buying the things that he didn’t need, going to movie theaters. He always told me that it’s okay to do that one because he doesn’t have a debt, but when I asked him if he do have an emergency fund, he just stared at me.

  • None of those things are good. I think not knowing your financial picture is especially scary since it could be way worse than you think.

  • I think goals are extremely important no matter how big or small. If there are no goals then you will “miss it every time.” It, can be anything which is kind of scary when you think about it

  • Your last point is so true. I see a lot of people who expect to be bailed out of whatever financial situation they’re in. If not from a family member, then from the government. Life is so much easier when you hold yourself accountable for your own actions, spending and otherwise.

  • I’m going to refer back to my friend that I was talking about in your post yesterday (I swear the “friend” is not me-lol). I think he is so deep in the hole, that when spending opportunities come up, he has that “oh well I’m this far gone, what’s one more night” attitude. It’s sort of like people who are obese and figure that one piece of cake won’t make anything worse, but all of those small bad financial decisions lead up to one huge mess. And hey I’m not immune to it either. I was like you where I just got comfortable with how things were when things were good instead of drastically changing my behavior when I was laid off. I can catch myself pretty quick now if I’m headed in the wrong direction.

    • If there’s one thing we’ve learned, Tonya, it’s that all of those small decisions, whether in money or with weight, do really and truly add up. Facing up to this truth has changed our lives in so many ways. Now, instead of looking at $5 like “It’s only $5”, we know that the $5 will indeed make some headway if we put it toward our debt. It really does all add up!

  • Giving your money a purpose is probably something I could have worked on better. Though we were saving half our salary and had a healthy emergency fund for the purpose of buying our home, we where also spending on stupid stuff as you said. We weren’t racking up credit card debt because we paid them off in full at the end of the month but a lot of that money could have gone to savings to help us when our home renovations went over budget. It’s definitely a lesson learned for me.

    • Yeah, it seems we all have our lessons to learn, don’t we. 🙂 I try not to think about how much money we wasted over the first 17 years of our marriage, but instead focus on the fact that from now on our money will be managed much more responsibly. Too much focus on past money mistakes is bad for the psyche. 🙂

  • Lauren says:

    I think fear keeps people from wanting to know the whole picture. I’ve seen this with family members, and it’s such a big mistake! You can never get ahead and make a plan without knowing where you stand and what you need to do to make positive changes.

    • Oh yes, Lauren, I totally agree, and we were them not too long ago. And truthfully, that first look at our financial picture was devastating. It took us months to get over what we’d gotten ourselves into, from an emotional standpoint. Now, though, I’m so glad we faced our fears and looked at the whole picture, because now we’re on our way to MUCH better things. Thanks for your comment! 🙂

  • Kim says:

    I could have written that one myself, Laurie. I think sitting down and looking at the numbers was the worst part. After you make the commitment, you know this is the highest the balance is ever going to be and it gets better.

  • I think most financial bloggers are too paranoid in general to be overconfident about their finances, but I definitely think this is a huge issue today. Having a positive outlook is one thing, but it’s very easy to use false relative references to make yourself perceive your situation as being better than it really is.

    • Yeah, but you and I know that the PF blog writers and readers are a different breed altogether, kinda like the geek group that sits together at lunch in high school. The others all think we’re weird, but we know better. 🙂

  • Being over confident was my biggest financial mistake. I took my six figure income for granted and when the market crashed I had no plan B. That mistake cost me big time. Lesson learned.

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