I’m sure most of us can relate – there are often one or two people in our family, or close circle of friends, who are not particularly savvy when it comes to managing their finances.

Often, these people are generous to a fault, prioritising “the here and the now”, opposed to thinking about their finances as a whole and the long-term impact of their decision-making.

These individuals often try to live the life they want rather than the one they can afford, and in the long term, this approach can lead to disastrous financial consequences.

Below are five key indicators of financial irresponsibility that may be affecting your life or the lives of those around you.

1, Living beyond your means

One of the most obvious signs of financial irresponsibility is maintaining a lifestyle that exceeds your financial capacity. If you consistently spend more than you earn, it’s a clear red flag. This unsustainable pattern can appear in several ways:

• Relying heavily on credit cards for everyday purchases

• Frequently upgrading to the latest technology or luxury items, regardless of cost

• Living in a housing situation (rent or mortgage) that is too expensive relative to your income

When individuals prioritise short-term satisfaction over long-term financial stability, they often fall into the trap of debt. Living beyond one’s means can lead to a cascade of negative consequences, including debt collection, bankruptcy, and heightened stress.

2, Failure to keep track of spending and budgeting

A lack of awareness about personal finances is another clear sign of financial irresponsibility. If you rarely know where your money goes each month or don’t have a budget in place, it’s time to reassess your financial habits.

Here are three signs that you might need to improve your expense tracking:

• Inability to account for monthly expenditures

• Frequent surprise expenses that disrupt financial planning

• Ignoring bank statements or credit card bills

Budgeting is a vital tool for financial success. It helps you allocate funds wisely, prioritise necessary expenses, and save for the future. Failing to track spending often leads to overspending and increased debt.

3, High levels of debt

Using credit is not inherently bad, but mismanaging debt is. For many, student loans, mortgages, and car payments are essential tools for achieving lifelong goals. However, when debt levels become unmanageable – especially credit-card debt – the consequences can be severe.

Here are three signs of debt mismanagement:

• Relying on credit cards for everyday expenses without a repayment plan

• Missing payments or making only the minimum payments on debts

• Continuously borrowing to pay off previous debts (a cycle known as “debt stacking“

Excessive debt not only hinders financial growth but also causes significant emotional stress. It’s important to routinely assess your debt levels and create a plan for paying it off.

4, Neglecting savings and emergency funds

Failure to prioritise savings is a clear sign of financial irresponsibility. People often focus on immediate financial needs or desires, neglecting to set aside money for the future.

Three common signs of neglecting savings include:

• Living paycheque to paycheque with no emergency funds

• Making minimal or no voluntary contributions to your pension plan

• Overlooking the importance of building an emergency fund

An emergency fund is essential for financial stability, serving as a safety net for unexpected expenses, such as car repairs, major home repairs or job loss. Without one, individuals often resort to high-interest credit cards or loans in times of crisis, worsening their financial challenges.

5, Avoidance of financial responsibilities

A subtle yet common sign of financial irresponsibility is the tendency to avoid financial responsibilities altogether. Some people may shy away from discussions about money, bill payments, or investments.

Three signs that you or someone else might be avoiding financial obligations include:

• Ignoring bills or missing payment deadlines

• Avoiding financial conversations with spouses or family members

• Relying on others to handle money matters

This avoidance can stem from fear, lack of knowledge, or denial, but it often leads to serious consequences. Ignoring financial responsibilities can result in late fees, penalties, or harm to your credit history.

Taking control of your financial situation starts with open communication and proactive engagement in managing your finances.

If you have identified with any of these signs, the good news is that recognising them is the first step towards developing a plan to get back on track and on the path to financial independence – ultimately the financial goal for most people.

Financial independence can mean different things to different people. From my perspective, it represents a state where an individual has sufficient personal wealth to live comfortably without relying on active employment. This autonomy enables you to make choices based on personal values rather than financial constraints, paving the way for a life of purpose, fulfilment, and freedom.

Financial independence is not just about accumulating wealth; it’s about achieving a state of freedom that allows you to live life on your own terms.

Achieving financial independence involves a multifaceted approach that includes earning, saving, and investing wisely. It also encourages adopting a proactive mindset towards managing finances, starting with setting clear financial goals – whether it’s retiring early, travelling the world, pursuing a passion, or simply enjoying a stress-free life.

For me, financial independence means being in a position where I work because I want to, not because I have to. It means making thoughtful decisions when it comes to managing money, spending money, investing money, and, most importantly, ensuring the income I generate at least keeps pace with inflation.

I’m sure most of us have areas we could improve in our finances. By making a few adjustments now, we can bring the road to financial independence a little closer.

• Carla Seely has 24 years of experience in the international financial services, wealth management and insurance industries. During her career, she has obtained several investment licences through the Canadian Securities Institute. She holds the ACSI certification through the Chartered Institute for Securities and Investments (UK), the QAFP designation through FP Canada, and the AINS designation through The Institutes. She also holds a master’s degree in business and management