Finances are a common source of tension in relationships, which can be intensified when you or your partner exercises poor money management. Financial irresponsibility can have all kinds of unfavorable consequences, such as difficulty getting approved for a mortgage, spending a big portion of your income to pay off debts and even bankruptcy. Looking out for warning signs of bad financial habits can help you identify and remedy problems before they get out of control.
High Credit Card Balances
Credits cards are a convenient way to pay for day-to-day purchases, but allowing credit card balances to accumulate is dangerous for your financial health. Credit cards often carry high interest rates, so letting your balances creep up toward your credit limit can cost you hundreds of dollars a year in interest. High credit balances can also hurt your credit score, which can make it harder to get approved for loans when you really need them.
Lack of Emergency Savings
Have you ever gotten in a car accident, fallen ill unexpectedly or been fired from a job? Life is full of unexpected events that may cost money. Building up a pool of emergency savings that can pay for about six months of your annual expenses is important to ensure that you can continue to live normality when life throws you a curve ball. You shouldn't count on being able to take out a loan to get out of a jam like paying for living expenses after losing a job, because lenders aren't likely to give you money if you don't have a steady income.
Paying Bills Late
Making late payments on bills or missing payments entirely are red flags for poor money management. Your debt payment history is the single most important factor in determining your credit score, so late and missed payments can severely damage your credit and make it hard to do things like buy a home or finance a new car. Getting behind on bills is usually a symptom of taking on too much debt and using too much credit.
Hearing From Creditors and Debt Collectors
If you are contacted by your creditors or a debt collection agency, there's a good chance that you made some money management blunders in the past. As long as you pay your bills on time, creditors generally leave you alone. If you get threatening letters or phone calls, it probably means that you took on more debt that you can handle or failed to act quickly to get on top of your debts after a late or missed payment.
Gregory Hamel has been a writer since September 2008 and has also authored three novels. He has a Bachelor of Arts in economics from St. Olaf College. Hamel maintains a blog focused on massive open online courses and computer programming.