I've done that routine. I've walked around feeling as if my accounts are all balanced, when in fact I've secretly mourned a major (emotional or monetary) loss. That disconnect can throw me into a deeper pit of debt over the long run. And I have friends and peers who have done the same. We all have moments of blindness, either willful or partial blindness.
But here are 10 signs I now use as flags to let me know that I need a reality check or a financial tune-up. These debt flags indicate if we're either over-spending or under-earning. I've put together the list after reading Why Women Earn Less by Mikelann R. Valterra and The Weekend Millionaire Mindset by Mike Summey and Roger Dawson.
10 Forms of Secret Debt
- Tapping Retirement Plans: If you are borrowing money from your 401k Plan, IRA or any other investment accounts, there's a glitch in your financial matrix. "When you borrow from your investments, you do not have to face up to the truth that you are not making enough money." --Why Women Earn Less by Mikelann R. Valterra
- Credit Card Balances: Carrying a month-to-month balance pulls us deeper into debt. What's more using, credit cards to pay basic bills is a form of "destructive debt" if the balance is not paid in full each month. It's destructive to carry balances on credit cards for stuff that depreciates quickly, according to Weekend Millionaire Mindset
- Family & Friends: If you're always tapping that network, it's time to get plugged into reality. When I have to rely on my parents, siblings or friends for a financial fix, I know that it's time take new action.
- Big-Ticket Debt: If you're not borrowing to make money, the new debt could slide you into a bigger hole, according to Weekend Millionaire Mindset : "Debt to acquire cars, boats, campers, motorcycles, furniture or other large ticket items that are not used to generate income are additional examples of destructive debt."-- Weekend Millionaire Mindset
- Long-term Savings Accounts: When I have to tap long-term savings accounts to fix day-to-day budget gaps that's a warning flag. As a safety net, I like the idea of having special accounts for large purchases, vacations and emergencies. But I really believe that long-term savings, investment accounts and retirement funds should not be tapped for trinkets and basics.
- Home-equity loans: To borrow against the home to pay for creature comforts and vacations seems shady to me. However, borrowing against a home to pay for education or to finance a business is a good investment, according to financial planners that I have interviewed.
- Children's Savings Accounts: Borrowing from the kids is another red flag.
- Bounced Check Overdraft Protection: An expensive red flag.
- Salary Advances: A lot of company's are flexible about advancing paychecks. It's a convenient move, but another red flag. The salary borrowed today, is gone by payday.
- Borrowing Time: When I feel pressed to work around the clock to pay off bills or other obligations, that's a major warning sign. Sure, I'm not borrowing money from an institution or a person, but I'm borrowing time from my life. There's major evidence linking financial stress, long hours and sleep deprivation to major illnesses. Here's a piece linking the graveyard shift to cancer.
The Frugal Duchess Booktique
The Frugal Duchess of Beauty Store
Book Shop of Fear
The Poetry & Drama Queen
Frugal Jazz & Blues
Frugal Comic Book Connection