Financial advisors can spot a bad banking habit a mile away. Think of them as detectives for your personal money matters — a Sherlock Holmes for your dollars and cents. They can tell a lot about how successful you’ll be with your banking based on your patterns and behaviors, or, conversely, how unsuccessful you could become.
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When a good financial advisor puts a magnifying glass to your statements, they might detect evidence of financial instability. What clues do they look for? To uncover the patterns that spell trouble, GOBankingRates connected with Taylor Kovar, CFP, CEO and founder of 11 Financial, and Derek R. DiManno, CFP, CLU, CLTC, founder of Flagship Asset Service.
Learn from these four banking habits that could lead to financial trouble — so you don’t find yourself in the cold cash files.
Kovar doesn’t need a magnifying glass to spot this red flag. If you’re relying on credit cards for your daily spending — especially if you’re carrying a balance month to month — you’re on a crash course for financial instability.
“It’s not a sustainable habit, and it often leads to growing debt that’s hard to get out of,” he said.
Instead, use a debit card linked to your bank account, which only lets you spend what you have available. Sitting down with a financial advisor can help you eliminate excessive spending and develop a workable budget to keep you out of debt — or pay down what you already owe.
Another major culprit is juggling multiple high-interest loans without a plan to pay them off — a scenario that can quickly spiral into financial chaos.
“These habits indicate that someone might be living beyond their means or not fully planning for the future, which can easily spiral into bigger financial issues if not addressed early on,” said Kovar.
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Feeling overwhelmed financially can make you want to bury your head in the sand and keep taking out loans, but it’s crucial to stop and take a breath (preferably after your head is out of the sand). Consider working with a financial advisor or even a financial therapist to identify troublesome spending patterns and heal your relationship with money so you can build more stable, sustainable financial habits.
Payday can be one of the most dangerous days for your finances if you’re not spending strategically. You might wake up the next morning broke, and it wouldn’t take a financial detective to see why: You splurged on unnecessary items that weren’t in your budget. Or, conversely, maybe you rushed to pay down debt before tackling your current bills. Either way, spending without a plan has put you back in the hole.
