The average US household with debt carries $15,762 in credit card debt — and over $130,000 in total debt.

Debt is a drag — on on your credit score and savings, but also on your psyche.

While debt is mathematical, it’s also highly personal. Some people might feel that a mortgage is good, manageable debt, and others might feel the pressure of owing their lender money. Some might consider student loans to be a necessary evil, and others might do anything in their power to avoid them. The one exception to this rule is consumer debt of the sort that comes from credit cards and personal loans, which is widely regarded as the worst possible type due to its high interest rates and lack of return on your expenditure.

A mortgage or student loans happen in an instant, when you decide to sign on. But other, potentially more expensive and insidious debt can creep up on you. To help you figure out whether you might be in danger, we’ve rounded up eight red flags to watch out for.

You can barely pay your bills each month

Are you counting down the days to payday, hoping you’ll have enough to meet your obligations each month? This is known as “living paycheck to paycheck,” and could quickly spiral into credit card debt — plus, it makes it nearly impossible to build up significant savings.

You have two options if you find yourself in this situation: Earn more money, or spend less. If you go the first route, take a look at lifestyle changes to make if you want to earn more, steps to negotiate a raise, and ways to make extra cash while working full-time.

If you’re aiming to spend less, check out lifestyle changes to make if you want to spend less and saving strategies from everyday people who retired before 40.

You don’t set aside money for big, upcoming purchases

Big purchases are bound to surface in your future — and if you aren’t prepared for them, you could wind up deep in debt.

The USDA estimates the average cost to raise a child at about $245,000, and that doesn’t include college. Or, if you’re looking to buy a home, you’ll likely need significant savings just for the down payment. Other big purchases you may want to think about include a car, graduate school, or a vacation.

Start by establishing what is important to you and what you want your future to look like, which will make it easier to create savings goals. Next, you’ll want to figure out how much you would have to save, how long you would have to save for, and at what rate of return you might need your investments to grow in order to reach those goals. 

You invest differently depending on how much time you have — generally, the more time you have until you need the money, the more risk you can take. Read up on the types of asset classes in investing to figure out where you might want to put your money.

You don’t have an emergency fund

While many people tend to ignore the possibility of their car breaking down, a medical emergency, or losing their job, these are all scenarios that could quickly become expensive realities. Not setting aside money could ultimately land you in debt or force you to borrow from a long-term savings account if an emergency does arise.

The amount of savings you need is highly personal, so it isn’t usually measured in terms of dollars. Rather, it’s months of living expenses that money could cover. A general rule is that it’s smart to have six months’ worth of savings tucked away, but you may need more or less depending on your situation.

You spoil your kids

According to a survey from T. Rowe Price, nearly half of American parents have gone into debt to spoil their kid.

What’s more, 57% of parents said they spend too much on things their kids don’t need, and 55% have dipped into their emergency funds to cover non-emergencies, like day-to-day expenses.

Start by deciding whether you’re spoiling your kid — if you are, read up on strategies to raise children who aren’t spoiled.

You can’t pay more than the minimum on your credit card balance

If you can’t pay more than the minimum month after month, you’re overspending and headed straight towards credit card debt. You should always aim to pay your credit card balance in full to protect your credit score and to stay out of debt — and if you can’t, you’re living beyond your means and falling behind on your savings.

Divert money from another part of your budget or cut back on spending to free up your cash to pay more than the minimum. In the long run, paying only the minimum will cost you a fortune.

You try to show up your friends

Do you choose where to live, what to wear, where to eat, and what gadgets to buy based on what your friends do? While living up to your neighbors’ or coworkers’ standards can be tempting, it can also be detrimental to your finances.

In fact, the Wall Street Journal reported that, “Many people would rather struggle to pay off a large credit-card bill than utter the phrase ‘I can’t afford it.'”

Be aware of friends who tempt or pressure you to spend too much money. Just because your friend can afford to buy the latest iPhone and live in a high-rent neighborhood doesn’t necessarily mean you can, too. Plus, research has shown that if you and a friend both turn down an expensive purchase you can’t afford, it will actually strengthen your relationship.

You don’t have health insurance

It’s easy to feel invincible when it comes to health, or to ignore the possibility of a medical emergency. This invincibility complex is costly, as medical bills are the biggest cause of personal bankruptcy.

It’s important to plan for the worst, as an unanticipated emergency could turn your life upside down instantaneously.

You don’t know how much you’re spending every month

Most of us know how much cash is flowing into our bank accounts each month — but just how much is flowing out? Do you know how much you spend eating out, on monthly subscriptions, or on coffee? It’s probably more than you think.

To get an idea of your weekly expenditures, try tracking your cash flow by recording each purchase you make in a spreadsheet or notebook, or downloading an app that will categorize and monitor your monthly and annual spending, such as Mint, You Need a Budget, or Personal Capital.

After all, it’s nearly impossible to make smart financial decisions if you’re only guessing how and where you spend your money.

 

This article was written by Kathleen Elkins from Business Insider and was legally licensed through the NewsCred publisher network.