10 Red Flags That May Signal You’re In Big Financial Trouble

One of my favorite television shows is National Geographic Channel’s Locked Up Abroad. Each week, this absolutely fabulous show features the story of somebody who had the misfortune of either getting incarcerated in a foreign prison or kidnapped abroad and held against their will.

For those of you who haven’t seen it, Locked Up Abroad is narrated on-camera by the actual people whose story is being told. This first-person narrative not only gives the show an emotional kick that would otherwise be lacking, but it also effectively conveys the tension that these poor folks were feeling at the time of their ordeals. I always find myself squirming on the edge of my seat as their stories slowly unfold.

Sadly, a common thread that stands out in almost every episode is that most of these folks could have avoided their inglorious fates if they had only heeded the red flags that were flying all around them.

If it weren’t so tragic it would be comical.

“I entered Caracas International airport with 20 kilos of heroin strapped around my waist. Then I saw the drug sniffing dogs, relentless police presence, and even the paramilitary conducting on-the-spot body cavity searches. At that moment I knew I should’ve turned around and called the whole thing off — but then I took a deep breath and told myself to stop being paranoid because everything was under control.”

Of course, those ex-cons featured in Locked Up Abroad aren’t the only ones who ignore obvious warning signs of impending doom.

In the personal finance world, people routinely ignore red flags that suggest their financial situation is unstable and susceptible to collapse.

That’s important to know, considering that debtors’ prisons still exist in the United Arab Emirates and, somewhat ironically, Greece — which is why I’m sure that it’s only a matter of time before I see an episode of Locked Up Abroad featuring the story of a debtor who got stuck in a Greek hoosegow.

Thankfully, the rest of the world has abolished debtors’ prisons. They’ve since been replaced with bankruptcy, civil litigation, and ruined credit ratings.

Even so, you should always be on the lookout for the following red flags that often signal your finances are in disarray:

1. You have revolving balances on your credit cards. Folks who fail to pay off their credit card bills in full each month, by definition, are in violation of one of the ten commandments of personal finance. That is, they spend more than they earn. As a result they’re more susceptible to defaulting on their obligations down the road.

2. You rely on payday loans to cover your bills each month. This is one of the worst examples of living beyond your means.

3. You’ve been turned down for a consolidation loan. This is a sure sign you are already over-extended and that your debt-to-income ratio is too high.

4. You’re hiding your spending behavior from family members. This red flag indicates that you are aware of your personal finance problems, but are unable to acknowledge it. Fighting with your spouse is a related indicator as financial troubles often lead to domestic trouble.

5. You finance your vehicle for more than five years. This is a clear sign that you’re buying more vehicle than you can reasonably afford.

6. You get more than one late notice per year. On occasion, everybody may let a bill fall through the cracks and forget to pay it. But if you find yourself getting multiple late notices for bills, especially for utilities, then that’s a signal that your finances may be in serious trouble.

7. You get more than one bounced check per year. Again, most folks have had an occasional overdraft of their checking account. But if this happens more than once per year, it’s usually a sign of trouble.

8. You need a co-signer to get a loan. Those without a credit history can ignore this warning sign. However, for everyone else, the need for a co-signer indicates that banks no longer find you credit worthy.

9. You find yourself borrowing from your family and friends. I know. Borrowing from friends or family is a surefire way to sow the seeds of discontent — especially when you fail to pay the money back.

10. You lack an emergency savings account of at least three months living expenses. Those who are living from paycheck to paycheck can be completely derailed by even the most modest unexpected expenses, such as the need for major car repairs.

So there you have it. If you find yourself participating in two or more of these practices, then you better get your financial house in order. Pronto.

And even quicker than that if you’re living in Greece.

Photo Credit: Victoria Reay


  1. 1


    Talk about “Locked Up Abroad” : This show is one my top favorite shows…can you believe how people’s desires change when confronted with difficulties. They gave up everything they worked for just to get their freedom. So the question is, can you put a price on your freedom?

    Thanks for your article…

    • 2


      Freedom is priceless, no doubt about it. Unfortunately, those poor folks in Locked Up Abroad didn’t seem to figure that out until after they had lost theirs.

      By the way, I haven’t seen any new episodes lately… I wonder if the show is still in production?

  2. 3


    It’s a good list, although there’s one way of saving on car repairs:
    Buy a set of spanners and a repair manual. And in this weather, a good set of gloves is also a must. Yesterday I spent 2 hours underneath our car doing an emergency repair, and I need to finish the job this weekend. On the plus side though, I have saved myself about £200 (roughly $300) in labour charges.

    • 4

      Len Penzo says

      You had me for a minute, Matt. (I had to look up “spanner” in the British English – American English dictionary! Now I know you are talking about a wrench, as we call them on this side of the pond.)

      I know almost nothing about fixing cars. But that’s why I have my father-in-law! :-)

  3. 7


    I had no clue debtor’s prison still existed anywhere but nothing surprises me these days. I would add if you keep using 0% balance transfer cards and never pay the debt down (and don’t have the ability to pay it off) that you’re in trouble. I know it falls in the revolving credit item you listed but people in denial might not count 0% debt because it isn’t incurring interest.

  4. 11

    Allyn says

    Okay, raise your hand if you remember one-year car loans. I remember when two-year loans started being offered and I said, “My god! If you need two years to pay off a car, you can’t afford that car.” Now you can get seven- and eight-year loans. It blows my mind.

    • 12

      Len Penzo says

      Okay … I don’t remember that, Allyn! But then again, I didn’t take out my first loan to buy a car until I was 33 (I think it was a four-year loan) — so I probably wasn’t paying attention back then. :-)

  5. 13

    SassyMamaw says

    Well, Len, there was a time, just a few years ago, when I had 8 out of 10 of those signs, and was very nearly bankrupt. I am very careful with my spending, but I am married to a wonderful man who wasn’t. *sigh* So, we are four years into what I call my ‘five-year-plan’, and while we still have 2 of the 10, we will be off the list altogether by the end of this year!

    I love your blog, and have learned a lot. I just thought you should know that you are helping real people with real problems out here. Thank you.

    • 15

      Lori says

      You are so fortunate that your wonderful man saw the light. My dear friend is dealing with a husband who has run up credit cards to the max numerous times. Each time, he promises to reform if she will just let him refinance the house to pay off all the cards so they could start fresh. Each time, he runs the credit card balances right back up to $30,000 or more–then spends the next couple of years paying only the minimum payment. Now they are about to lose their house, because it’s now mortgaged for twice its value (housing crisis), and they can’t make the payments. And he still takes out credit cards (why anyone gives him one, I don’t know), and has total minimum payments of $700/month.

  6. 16


    What a crazy place life would be if we had debtors prison here. The list sums it up nicely but for anyone to want to get out, they have to believe. Believe there is a way to have a better life, better finances and move forward. That change starts with-in. Great post mate.

  7. 20


    While reading through this post, I’m trying to evaluate my current financial situation. Thank goodness, I’m nowhere near any of these 10 signs.

  8. 21

    Dennis says

    I have 5 of the 10 above, and was nearly about to drown in the ocean of debt….but, I wised up (I guess) and drastically cut expenses, took control of the spending in the household, and have been able to save money to put on credit card balances to pay them down and within a year or so, off.
    My wife and I got caught up in the whirlpool of credit debt so easy that it almost put us in financial ruin. Luckily we will be able to dig ourselves out of it in a year or so and will definitely live smarter from this point on.

  9. 22


    Hi Len! I came over to your blog from a post at BudgetsAreSexy and I wanted to let you know I agree with all of these! Lucky for me I don’t get late notices or hide financial things from my family, but the student loans sure are a pain in the tush.

    Anyway, great post, thanks for the read :)

  10. 23

    Matt says

    At 21 I suffer from #10. I’m currently working on it and should have the funds saved up without much issue by half way through 22..

  11. 24


    The three months’ living expenses as savings is for me the most important. Let’s face it, if you but away 10% of your take home pay each month, you’ll build that up in 2 1/2 years (providing you don’t hit a bump in the road on the way). Keep putting that 10% away each month and it soon adds up.

  12. 25


    Payday places and rental centers prey on the poor. I know many people who get money from 2 or more payday centers and just keep going in circles — sad but they never get out of that cycle…some have been doing it for years…that is all they know (unfortunately this has made some very rich people) but to others they see at as a way of helping out the low income…what can be learned here??


Leave a Reply

Your email address will not be published. Required fields are marked *