It was a beautiful sunny day at Stinson Beach. The temperature was perfect, and the water was inviting. Unfortunately, you ignored the rip tide warning signs. It was not until you were being swiftly pulled away from shore that you realized that you were in danger. Lucky for you there was a lifeguard on duty.

That beach experience reminds me of what my budget clients’ experiences before they find me, their financial lifeguard. It has all the same components: denial, fear, a sense of a loss of control, and helplessness.

What do the danger zone and rip tide of your personal finances look like?

❖ Savings account balances dropping perilously fast and/or approaching a zero   balance.

❖ Credit cards and equity line balances close to the maximum limits.

How does it happen? How do you avoid those dangerous financial rip tides?

❖ Take care when you are in transition. Sometimes, my clients, who had good budgeting habits at one time, find themselves distracted due to a life transition, – starting a business, getting married, divorced, going back to school – that leads them to ignoring their personal finances.

❖ Watch out for taxes especially when the following happens:

  • You sell a major asset for a gain.
  • You tap your IRA account for cash.
  • You have debt forgiven.
  • You receive RSU’s (Restricted Stock Units).

Why? These activities typically do not require that you withhold income taxes. They can bump you into a higher tax bracket and, even worse, cause you to pay AMT (Alternative Minimum Tax). Not only will you be surprised with a large tax bill, your total tax bill will be proportionately higher.

❖ Be very wary of using credit, especially if you find yourself starting to use your credit cards for expenses that you normally pay with cash, or;
you stop paying the full balance each month, or worse;
you start paying only the minimum payments.
In time, maybe not right away, the minimum payments grow until eventually you miss a payment or two in one year. Then the credit card company will raise the interest rate to 20-30%. At that point, it’s going to begin to look impossible to pay off your debt.

❖ Catch yourself checking your account balance to determine affordability of a purchase? Caution. It’s the rare individual today who can contemplate 12 months of large infrequent expenses. If you’re not saving for expenses such as vacations, tuitions and property taxes, you might find yourself short when they come due. That’s when the credit cards come out.

Do you feel the sand pulling away from under you? Wondering how to connect with your own personal finance life guard? You can start with making a budget. And if you’ve tried and failed doing it yourself in the past, let an independent hourly financial planner, preferably with the CFP® license, help you. It starts with a call, 415 785-3268, or an email,