Budgeting Debt

Signs of Financial Irresponsibility

Handling money responsibly isn’t an easy task for everyone. Some people just don’t have the financial education or experience others have had, or they may not even realize that they are financially irresponsible. Several signs can point to financial irresponsibility. And if you can check off multiple of them when comparing your finances, then some things will need to change. The good news is that you can take several easy steps to become more financially responsible! Keep reading to learn about the different signs of financial irresponsibility and how you can turn it around. 

Bad Credit as a Sign of Financial Irresponsibility

One of the most significant signs of financial irresponsibility is a bad credit score. Your credit score comprises different factors like your payment history, credit utilization, loan or credit card defaults, etc. It’s one thing not to have any credit history or a low credit score because you haven’t taken out any loans or credit cards. It’s another if you have a handful of loans and credit card accounts and aren’t making your payments on time or at all. 

A bad credit score can be considered anything less than 670. Improving a bad score will take some time, but things like on-time payments and paying off debt can help improve your credit score and, at the same time, help you build better financial habits. 

A Constant Need To Borrow Money To Make Ends Meet Despite Making Enough To Get By 

Another sign that you may need to change your financial habits is if you constantly need to borrow money to make ends meet, even if you make enough money to take care of your everyday expenses and bills. Whether that means borrowing from a loan option or friends or family, you’re likely spending money irresponsibly if you find yourself borrowing money constantly. 

If You Don’t Have a Budget, You Are Likely Financially Irresponsible 

A budget is a financial tool that helps with money management. Not having one can definitely be a sign of financial irresponsibility. If you don’t have a budget, consider creating one. To make a budget, all you have to do is track your income and expenses to develop a plan and limitations to how you spend your money. You can pursue several kinds of budgeting techniques; some may work better for you than others. Do your research to learn about common budgeting mistakes when managing money so that you can avoid them. 

A Non Existent or Minuscule Savings Fund

A savings fund or emergency fund is essential for financial security. As a general rule, most financial experts recommend that people have at least three months of savings in their accounts. Suppose you don’t have that money saved up or any amount. In that case, if any emergency occurs, you will have financial difficulty and may have to turn to borrowing money to get by. 

Having any savings can prevent debt during an unexpected financial situation. On its own, not having an adequate savings account won’t necessarily mean warning signs of financial irresponsibility, as some people may not make enough to save that much right away. But if you make enough to save but choose not to, that can definitely be a sign of being irresponsible with your money. 

You can start small with a savings fund, and there are different strategies you can use to begin your savings journey. A few savings methods include the 60-day savings challenge, the $1 savings challenge, and the 100 envelope method. 

Overspending and Living Above Your Means as a Sign of Financial Irresponsibility 

Spending money that you don’t have or living above your means is a massive sign that you are financially irresponsible. What does spending money you don’t have look like exactly? Usually, this means spending money using multiple credit cards or other loan options to pay for expenses because you can’t afford to pay for those things out of pocket. Or it could look like spending money on wants vs. needs before necessities are taken care of. 

Lying About Finances

When you share finances with another person/family member and find yourself lying about how you spend your money—also known as financial infidelity—it’s a warning sign that you are financially irresponsible. Most of the time, shared finances will mean that another person will be contributing their hard-earned money into a joint account. And your spending habits and debt will impact that person’s finances. Lying about money can negatively affect your finances and your relationships. And so, it is extremely important to be transparent and honest with things like debt, income, bills, and all other spending habits when sharing finances with another person. 

Not Paying or Avoiding Bills

If you have the income to do so, avoiding or not paying bills altogether should be a significant warning sign of financial irresponsibility. Your bills can include your rent or mortgage payments, utilities, insurance payments, and more. Even if you live paycheck to paycheck, These necessities should be the priority of what you should spend money on, and if they are not, it may be time to start thinking about your money. 

If you struggle to pay bills, something as simple as automated payments can help tremendously. You can also focus on making bills the first thing you take out of your paycheck each month. 

Maxed Out Credit Cards as a Sign of Financial Irresponsibility

Most Americans have credit card debt that they are paying off. However, if you have several credit cards that are maxed out, then that can definitely be a sign that you are financially irresponsible. It can be easy to fall into a cycle of credit card debt, especially if you have bad spending habits. There are all kinds of tips and strategies available to help you manage your credit cards wisely, but what if you cannot handle doing that at the moment?

If you cannot handle revolving loans like credit cards, you may want to opt-in to secured card options, where you have to add money to use money. Or you can opt-out of using them altogether by simply keeping them in a place where they aren’t easily accessible, so you don’t have them at hand until you pay them off. Once paid off, you can even consider canceling your card accounts. Keep in mind to do this strategically, as there are a few scenarios in which closing credit cards hurt your credit scores.  

If you are trying to pay off a large amount of credit card debt, you can use all kinds of strategies. Some of these methods include using a balance transfer card, which provides a way to consolidate credit card debt into one interest rate and monthly payment. 

Not Having Financial Goals Set

Setting financial goals for your immediate and long-term future is a sign of financial responsibility. And so, if you don’t have any financial goals, you may be considered financially irresponsible. Below are some common financial goals (short and long-term goals) that people set for themselves:

  • Creating an emergency fund
  • Buying a house or real estate 
  • Paying off all of their debt (credit cards, student loans, personal loans, online payday loans, title loans, or paying off a house or a car, etc.)
  • Planning for retirement 
  • Acquiring assets to build their financial portfolio
  • Having multiple investments 
  • Family planning 

If you don’t have a financial goal in mind, you can start small, for example, work on saving on a regular basis.