These Are the 8 Financial Red Flags You Should Address Before You Turn 40

When the restaurant isn’t clean, that’s a red flag. When your date forgets his wallet, that’s a red flag. And when an auto mechanic pushes a bunch of costly repairs on you at the garage, that’s a huge red flag.

Then, of course, there are financial red flags. Life sends you these little alarm signals your finances aren’t quite where they should be. For example, when your bank hits you with an overdraft fee, that’s a clear sign your finances could use some TLC.

As we mature, we try to cast off these red flags, but sometimes they’re difficult to shake. Here are several common financial red flags you should address before you turn 40 — plus easy ways to eliminate them this week.

Red Flag No. 1: You Don’t Have a Budget

Do you know how much of your income goes toward housing? Or how much you spend on dining out each month? Have you set any financial goals lately? What’s your savings look like?

One of the simplest ways to identify — and overcome — multiple financial red flags is to create a budget. We know, we know. Budgets are no fun. But that’s why we recommend the 50/20/30 method — because of how simple it is.

Here’s what it looks like:

• 50% of your monthly income goes toward living expenses. These include rent, mortgage, utilities, groceries, car payments, gas and loan payments.
• 20% of your monthly income goes toward money goals, which can include investments, savings and debt-reduction payments above the minimum amount.
• 30% of your monthly income goes toward personal spending. That’s everything else.

By creating a budget, you’ll be able to identify — and conquer — several financial red flags and feel more confident about your money.

Red Flag No. 2: You’ve Had to Consider a Payday Loan

Sometimes we all need a little help. Rent is due, or you need to buy groceries, and you just don’t have the money. You’ve exhausted your options. What do you do?

For a lot of people, the answer is a payday loan. But what starts as a quick fix can quickly drag you into a cycle of debt with interest rates of 300% to 400%. Red flag!

Possible Finance is an alternative to payday loans — one that’s less expensive, easier to repay and helps build your credit. It will lend you up to $500 with no credit check required.

Instead of having to repay the entire loan the next time you get paid, Possible gives you two months to repay it in several installments — and it builds your credit as you do.

It still comes with interest. Most of its loans have an APR of around 150%, but that’s still about half the rate of a payday loan — with much longer to repay it. If you’re in a pinch, it could save you a hefty late fee or missed rent payment.

It takes less than a minute to apply on its free app. If you’re approved, you get your money pretty much instantly. Instead of using your FICO credit score, Possible links to your bank account, using your payment history to determine how likely you are to repay the loan.

Possible Finance is licensed in California, Florida, Idaho, Ohio, Texas, Utah and Washington, and will soon expand to additional states. In the meantime, you can join its waitlist.

Red Flag No. 3: You Owe $25K or More in Student Loans

If you still owe more than $25,000 on your student loans, join the club. There are literally millions of us.

And if you’re feeling totally hopeless, listen up: You might be able to escape faster than you think.

With a company called Splash Financial, you can take steps to refinance your student loans with a lower-interest loan in just three minutes. This could help you pay off your debt significantly faster and even save you thousands of dollars in interest.

At first, it might sound like you’re just moving your debt around, but the key is to find a loan with better interest rates (Splash’s fixed-rate loans start as low as 3.48%) and/or lower monthly payments.

For example, we talked to Ashley Williams, a financial analyst who graduated with $46,000 in debt. Refinancing saved her $18,000 in interest, and she’ll be debt-free five years sooner.

Getting a free quote won’t hurt your credit score. All you have to do is enter some basic info. (This includes your Social Security number so Splash can run a soft credit pull, but the site is bank-level secured!)

If you’re a college graduate, have a credit score of 660 or higher and an annual income of at least $40,000, you should have a good chance to qualify.

Red Flag No. 4: You Haven’t Shopped Car Insurance Options in 6+ Months

When was the last time you compared car insurance rates? Chances are you’re seriously overpaying with your current policy. 

If it’s been more than six months since your last car insurance quote, you should look again. 

And if you look through a digital marketplace called SmartFinancial, you could be getting rates as low as $22 a month — and saving yourself more than $700 a year. 

It takes one minute to get quotes from multiple insurers, so you can see all the best rates side-by-side. Yep — in just one minute you could save yourself $715 this year. That’s some major cash back in your pocket.

So if you haven’t checked car insurance rates in a while, see how much you can save with a new policy.

Red Flag No. 5: Your Savings Account Pays Less Than This One

If you have a savings account, that’s awesome! But chances are you’re not earning much money from it.

These days, the average savings interest rate is limping along at a measly 0.09%, according to the FDIC. Deposit a hundred bucks, and you literally won’t earn a dime in a month’s time. Let’s wave the red flag!

But with Credit Karma Savings, you’ll earn more than six times the national average.

And unlike other savings accounts, Credit Karma doesn’t make you jump through hoops to collect interest. As long as you have at least 1 cent in your account, you’re good to go. Best yet: No fees. The account is completely free.

It takes no more than a few minutes to open an account.

Red Flag No. 6: Your Credit Score is Below 700

Another red flag: Your credit score isn’t up to snuff. What happens when you want to buy a car? Or a house? Your credit score will play a huge role in whether you’ll be able to do that.

Sometimes you can even have a hidden error on your credit report (one out of five reports do) that’s holding you back.

Thankfully, a website called Credit Sesame will help — for free. It allows you to check your score, helps you find (and dispute) errors and even shows you ways to improve your score.

Take, for example, James Cooper. He didn’t know anything about credit, but Credit Sesame showed him the exact steps he needed to take to improve his score — from 524 to 801.

Then there are people like Salome Buitureria, a working mom in Louisiana who, in using Credit Sesame, found a major error on her report. The site helped her fix the mistake and take additional steps to raise her credit score nearly 200 points.*

Want to check for yourself? It only takes about 90 seconds to sign up and get started.

Red Flag No. 7: You Have No Retirement Plan

If you haven’t started thinking about retirement, now’s the time. The sooner you start, the better.

If your employer offers a 401(k) plan as part of its benefits package, then you should absolutely, definitely take full advantage of your employer’s matching contribution. If you’re already at the full company match, consider increasing your contributions even more. Trying raising it by at least 1%.

If your employer doesn’t have a 401(k) package, or if you’re self-employed, consider stashing retirement savings in a tax-free IRA. Contribute to it routinely and automatically, if you can.

Red Flag No. 8: You’re Paying a $100+ Cell Phone Bill

If you’re looking for bills to cut back on, we suggest looking at your cell phone provider.

How long have you been with your current company? Probably a while, right? Which means you’re probably paying way too much.

But we found a discount wireless company called Tello Mobile that offers plans starting at just $5 a month. How much are you paying now? Exactly. Imagine cutting that to just $5.

Tello recently switched to a nationwide GSM network, which means improved 4G LTE/5G coverage, faster data speed and a more stable network. It lets you choose a wireless plan based on how many minutes and how much data you want, and you can even use Tello’s coverage tool to see how strong its network is where you live. More than 7,000 customers have given it an excellent rating on Trustpilot.

Plus, Tello is super flexible. It lets you choose the plan that makes sense for you. Plans are priced based on how much data and how many minutes you want. For example, a family of four can get 2GB of data each, plus unlimited talk and text for just $56 a month total. Free hotspot and unlimited texts are included in every plan. Plus, there are no early termination or activation fees, no contracts or phone-exclusive plans and no tricks of any kind.

It’s easy to get started and see how much you could save. Tello makes it simple to switch and even keep your phone number. No need to even leave the house — you can do everything online. You can bring your own GSM phone or buy a new one through them. See how much you could save.

*Like Cooper and Buitureria, 60% of Credit Sesame members see an increase in their credit score; 50% see at least a 10-point increase, and 20% see at least a 50-point increase after 180 days.

Credit Sesame does not guarantee any of these results, and some may even see a decrease in their credit score. Any score improvement is the result of many factors, including paying bills on time, keeping credit balances low, avoiding unnecessary inquiries, appropriate financial planning and developing better credit habits.

Mike Brassfield ([email protected]) is a senior writer at The Penny Hoarder.