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Five signs your finances are in trouble
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Money ManagementMonthly financial advice
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The loss of a job, a sudden illness or another crisis can spell financial trouble for any family. Sometimes, however, people make small mistakes that add up over time to create big problems for their finances, according to the Maryland Association of CPAs.
CPAs recommend that you watch out for these warning signs that can signal potential financials pitfalls.
1. You have no budget
With a budget, you can take stock of how much money you have coming in each month, what your expenses are and what’s left over once you’ve paid them. Without this realistic assessment, it’s easier to spend too much —- often without even realizing you’ve done it -— and harder to reach your financial goals. Budgeting is an important first step in managing your money so take the time now to itemize each month what you earn and what you spend.
2. You have a budget, but you usually outspend it
Creating a budget is a good start, but then you have to follow it. If you find yourself spending far more on discretionary items such as entertainment or clothing than you budgeted for, it’s time to cut back. If you want to splurge, set aside some cash each week for fun, but don’t spend more than you planned for.
3. You pay only the minimums on your credit cards
Credit cards make it easy to spend, but they can be tough to pay off if you charge too much. If you make only minimum payments on your debt each month, a $1,000 debt can take up to 22 years to pay off. And during that time, you will continue to pay interest charges well in excess of your original purchases.
If you find yourself in this position, limit future spending by cutting back to just one card that you use only in emergencies. Then chart a new budget that will allow you to increase your monthly payments and begin reducing the size of your debt.
4. You are using one credit card to pay off another
This is a clear sign that spending is seriously out of control. It’s also an expensive way to manage debts since instead of erasing your outstanding balance you are simply shifting it to a new card with its own interest payments. A related warning sign is using your credit card to pay for regular expenses -— such as food, rent or car payments -— because you don’t have enough cash to cover those costs. There are both indications that it’s time to rein in spending.
5. You have no savings
Families are saving less than they have in the recent past and taking on more debt, according to the Federal Reserve. Without a savings cushion, it’s harder to bounce back from financial setbacks and less likely that you’ll be able to afford vacations and other indulgences. To fix this problem, start with small weekly deposits to a savings account Stick with your savings plan and you’ll be amazed how your balance will add up over time.
Take control
As part of the profession’s 360 Degrees of Financial Literacy program, CPAs have created a special Web site to help people with all their financial concerns: www.360financialliteracy.org. The site contains many articles and tools that you can use to gain control over your financial life. Remember, too, that your local CPA can offer smart ideas and recommendations to help you with any aspect of your finances.
Only CPAs are equipped to address your full range of financial needs with integrity and insight. In Maryland, CPAs must pass a rigorous two-day examination, adhere to strict ethical and professional standards, and, beyond college, complete 80 hours of continuing education every two years to be certified by the state — accountants do not.
Your doctor is certified; your lawyer is certified. Make sure your accountant is a certified public accountant.
For CPA referrals in your area, contact the MACPA at
The Maryland Association of Certified Public Accountants (MACPA) is a statewide professional association that provides leadership, information and services for its nearly 10,000 CPA members, who are employed in private practice, industry, government and education. CPAs are business and financial professionals who have passed a rigorous two-day examination in order to be licensed by the state. CPAs are committed to protecting the public interest, and must adhere to stringent ethical and professional standards and continuing professional education requirements.