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20 Signs You Need a Financial Makeover

by J. Money on Monday, August 30, 2010

Sad GeorgieI got this email from BillShrink.com the other day and couldn’t help but pass it along :) There’s something about it that just says “Hey you!  Stop what you’re doing and pay attention! Your money needs you!” Haha…

Some of these are pretty lame, but the majority of them are right on the money and should def. get you to think.  I had to take a few seconds and research at least 3 of them to see if I needed a makeover or not ;) And that’s really why I’m posting them up here today – not just because it’s a catchy headline.

Here are all 20 signs below.  Billshrink is in bold, and J. Money is in plain. How many do you need to correct?

  1. You charge group dinners on your card and keep your friends’ cash to spend. I actually don’t mind doing this myself as it saves me a trip to the ATM if I need the cash, but if you’re just being stupid and thinking it’s “free money” to go and blow anytime then yeah – you need a financial makeover.
  2. You spend more than 40% of your total income on rent. The last time I calculated this we were spending 37% of our total (net) income on mortgages.  And I’ll admit it’s not very savvy.  But I’ll also point out that we got ourselves into this BEFORE Mr. J. Money came about ;) So I agree with this one here – ya gotta keep your rent/mortgages way below that 40% line.
  3. You’re constantly transferring your balance to get 0% interest on your credit card debt. Bad if you don’t know what you’re doing, but good if you’re Jonathan from My Money Blog (the expert in xfering $20,000+ and milking the extra hundreds of dollars in interest every year;))
  4. You pay off one credit card with another. Yes, BAD!!
  5. Less than 10% of your income goes to your retirement savings.  (Or worse, zero percent!) I wouldn’t say you need a total makeover if you were saving 10% really, even though everyone would love to see you saving 15% or even 25%, but definitely saving 0% is a troubling sign.
  6. You have a credit card that doesn’t give you anything in return, like cash back or airline miles. Haha…well this isn’t the worst thing in the world, but it is a good idea to check and makes sure you’re getting *something* in return for doing nothing ;) You don’t have to do anything different than you’re doing now!
  7. You don’t know what IRA means outside of Ireland. (is that supposed to be a joke?)
  8. You pay the minimum balance on your credit card each month.Not the best habit to get into, that’s for sure.   If at all possible you should be adding in at least $25-$50 more every month to help knock it away as fast as you can.  I once paid $2,000 for a $1,200 computer back in the day because I kept just telling myself  “I’ll do it tomorrow.” Make tomorrow, today!
  9. You don’t open your credit card statement because you can’t bear to see how high the balance is. Oh yeah, definitely not a good sign.  You HAVE TO KNOW what you’re dealing with so that you can fix it and get right back on track!  And this goes for savings and investments too.  If you don’t KNOW what’s going on you’ll just keep sinking and sinking until it takes something tragic to snap you out of it.
  10. You don’t keep receipts because they remind you of what you’ve spent. Haha…that’s actually pretty clever ;)  STUPID, but clever.  Maybe these people should switch to debit cards instead? (I’m assuming they’re using credit cards which allow them to spend way more than they have due to credit limits and such. With debit cards though, you have a breaking point!  Once you hit $0.00 you can’t pick up anything else.)
  11. You know your company has a 401k plan, but you have no idea what that is. My favorite tool ever!  Just call up HR real quick (right now, actually, stop reading this!!) and ask how much your company matches.  Then, tell your sweet old HR lady (or man) that you’d like to contribute that exact same # and make sure to fill out whatever forms you need to do ASAP.  Even if you never look at it again, that one move you just made will hook you up years and years to come.  So do it!
  12. You withdraw cash frequently from ATM’s that aren’t affiliated with your bank. I don’t know if this one applies as much as maybe it used to.  Many banks now reimburse you for your fees so it doesn’t matter where you go (at least online banks do – like my fave USAA, baby!)
  13. The number of credit cards in your wallet is higher than the number of dates you’ve had this year. Hahahhahaa…..didn’t see that one coming :)
  14. You buy so much on eBay that they’ve awarded you VIP status. Wha wha wha….
  15. You want to start a savings account, but then sale season starts again! Is it me or are these going down hill?
  16. You don’t have an emergency fund to pay bills should you lose your job. Back in action!  YES, emergency funds are KEY to any financial game plan. Whether it’s $100, or $1,000, be sure to be stashing some aside for when you least expect it!
  17. Your monthly extra cell phone minute charges are bigger than your monthly electric bill. (I had to go look up my own electric bill to see if this is a good gauge or not, and indeed I think it may.  Although if we’re talking about overall cell phone bills and not just “minute charges” then the iPhone kills us!)
  18. You overdraw on your checking account more than once a year. Hmmm… once is kinda strict.  I’d say not more than 3 times a year cuz sometimes weird things just happen.  Although if you were really on top of it you’d sign up for overdraft protection (the kinds that don’t cost you any money!) so that you’d be safe just in case you got a little crazy here and there.
  19. You live paycheck to paycheck. This should be the #1 sign you need a makeover, hands down.  Living paycheck to paycheck is a recipe for disaster, and I know 80% of you reading this right now are in this boat :(  I was too!!!  For 25 years of my life!  If you haven’t been serious about making a change, please start today.  There are plenty of ways you can get yourself in better position, you just have to get on it and really commit.  Start tracking your money and finding where all your spending leaks are! Picking up a hustle on the side will help too.
  20. You spend more on new shoes annually than you save. Oh wow, that would not be good.  I think I’ve spent around $200 so far on shoes this year – and 2 of those were on new cleats that needed replacing. I would punch myself in the face if I was saving less than that every year :(

Were any of you surprised with your answers to some of these?  Did it get you to double check and see if you’re truly on track or not?  Again, some of these were pretty crazy and more entertaining than anything, but hopefully it moved a few marbles upstairs and will prompt you to start researching any areas that may need improvement. It’s always a work in progress :)

(This also reminded me of how much I wanna see a reality tv show come out on this!  Especially since The Bank of Mom and Dad is over :( Pass this along to any Hollywood producers you know of! )


{ 19 comments… read them below or add one }

1 Andrew August 30, 2010 at 8:11 am

No. 13 can be solved by going on more dates, which leads to more money on your assorted credit cards! Didn’t see that coming, did you? :D

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2 Techbud August 30, 2010 at 9:27 am

#8 was killing me for the longest time. 3 months ago I made a change. I closed all but one of my cards and have a plan to have them all paid off in the next few years.

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3 Molly On Money August 30, 2010 at 11:57 am

4 years ago I did about 18 of these. Today, none of them!
I’m doing a jig right now- I knew that BFA in Choreography would come in handy one day.

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4 momcents August 30, 2010 at 12:02 pm

Right now my money ratios are all out of whack, so I fail at both #2 and #4. The mortgages are currently 44% of our net monthly income (before bonuses and stock grants). But we’re paying off our second mortgage at the end of September, so that’ll bring it down to 34%.

Also, my husband is signed up for the company’s maximum 401k matching, but only invests 6% of his income in retirement. However, his company’s wage freeze is finally over after two years and he should be getting a raise next month. We plan on banking it, whatever the amount, and increasing his retirement contributions. Hopefully, by the end of next month, our retirement contributions will be at 10% or higher.

In case you can’t tell, I’m really looking forward to next month. :)

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5 momcents August 30, 2010 at 12:04 pm

Oops, I meant #2 and #5. I’m definitely not paying off one credit card with another. I’m debt-free, baby!

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6 Jenna August 30, 2010 at 2:24 pm

Number 7: Irish Republican Army – Wikipedia it.

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7 GBR Briana August 30, 2010 at 5:42 pm

I agree that #18 is a little strict; sometimes the money just doesn’t come in when you need to, especially after an emergency expense. I’m working on the makeover, because I definitely know I need one

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8 myfinancialobjectives August 30, 2010 at 6:28 pm

All great points. I really hope there aren’t many people out there paying back a credit card with a new credit card… That must be soooo frustrating!

The last one is just ridiculous – and what’s sad, is that I’m sure plenty of people do!

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9 J. Money August 30, 2010 at 9:42 pm

@Andrew – Haha, I did not good sir!
@Techbud – Good for you man, that is not an easy thing to do. Once you decide to make a change just keep on going!
@Molly On Money – Haha I love it :)
@momcents – You’re debt-free and on a mission!!! Music to my ears my darlin’.
@Jenna – Oh. Well it’s still not funny ;)
@GBR Briana – And that’s one of the most important parts! *Admitting* that you need a makeover. So many people are in denial these days, it’s crazy.
@myfinancialobjectives – Definitely ridiculous, but definitely true for some people :(

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10 Jenna August 31, 2010 at 1:44 pm

@J. Money – If you spend time abroad it could be a confusing conversation and thus funny.

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11 Slackerjo September 2, 2010 at 8:47 am

I spend 42% of my income on rent. I used to pay way less for rent but sadly where I live rent is high. I used to live in a cheaper building. It does not take long to grow weary of the CONSTANT visits to the building by the police department, noisy neighbors, ineffective building staff and the constant smell of marijuana.

It’s real easy to preach “don’t spend more than 40% on housing” but for those who are single (i.e. responsible for all costs) and make a modest salary, it’s not really a choice. And frankly, at age 43 I have no interest in roommates.

BTW, I do put 10% into a retirement fund and I have saved almost $5K in one year. I make $34K (Canadian) a year.

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12 J. Money September 2, 2010 at 7:15 pm

$5k saved on a $34k salary – that’s impressive! Well done :) And I agree that the 40% rent/mortgage rule is a lot harder to do in certain areas of the country (or world even). My ratio used to be around 65-70% when I first moved to the DC area – freakin’ crazy.

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13 Danny @Frugal Quack September 8, 2010 at 6:54 pm

The annual “shoe budget” versus savings budget is brilliant. Ha ha! That point alone may inspire a post on my little blog.

Cheers,
Danny

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14 J. Money September 16, 2010 at 10:41 pm

Do it! We all get motivation from somewhere :)

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15 Jer September 18, 2010 at 1:25 pm

I’m not entirely sure what living pay check to pay check is. I have savings, but I don’t use it. I usually put about 60% of my pay in there and live off the rest. I rarely buy anything I don’t need and generally live like a hermit. And the number of dates this year is equal to the number of credit cards I have in my wallet: 0.

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16 J. Money September 19, 2010 at 11:49 pm

you are not living paycheck to paycheck :) if you were, you’d be saving 0% every check and/or losing money every time. so well done!

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17 Lynda September 27, 2010 at 3:15 pm

Whhhhhyyyy don’t they teach this in high school or college as some type of prerequisite??!!! :( (What do I have to do to make that happen?!) Especially for 1st generation americans with parents who aren’t proper examples of mentoring proper habits on saving and managing a credit card. It could of saved me from falling victim to all these bad habits! From 2006 (the year i graduated college) till now!

#1… I irresponsibly used my credit card in a similar fashion and used the cash as “free money” when I was working for commission. Bad Idea indeed!

#7….right now i’m stumped because I feel like I am not making enough to put aside money for an IRA account since I’m paying for my debts related to #1.

#9….2 years flew by fast with me not looking at my credit card statements because of my bad habit in relation to #1 and not working a job at all for a period of time.

#10….I totally keep my receipts and note on my bank statements connected to mint.com to keep a reference on what I spent my money on whether it was for $1 for water with my debit card when i don’t have cash in my pocket or $5 for a few groceries or $10 for a doctors visit etc…..

#11….. Unfortunately my company does not offer 401k!!! :/……I’m searching for a new opportunity but I need this current job!

#16 & 19…$100 is realistic as part of an emergency fund but when I live paycheck to paycheck its tough to maintain an emergency fund.

Right now I’m working on getting a certification that with lead to a raise but I am definitely not planning to stick to my currnet job because of the lack of benefits! I’ll leave once I securely find something better!

Thank you so much for passing along this email J Money! <3…. I am happy to have found it through the ING Direct page in Facebook. It's reinforced my need to pay more attention on my expenses while I resolve my debts.

Many Blessings and Much Success to you
~Lynda

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18 J. Money September 29, 2010 at 8:16 pm

Yayyy!!! haha… that’s great you’re on top of this now girl! I think we all agree we wish we could learn a lot earlier in our lifetimes. Not sure how exactly since as kids we couldn’t care less, but there’s gotta be a way! Right? Right ;)

Thanks for sharing with us, I hope you stay around and continue participating my new friend.

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19 teak garden furniture March 26, 2012 at 12:46 am

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