I define a ticking-time bomb as: an unavoidable financial event on someone’s time horizon that they continue to ignore until it blows up their finances.
Examples include, putting an expense on your credit card that you had plenty of time to save up for, taking out a loan for a car or vacation, or the big expenses like: college, wedding, home, or retirement.
Some other very common ticking time bombs include:
- No emergency fund for being out of work
- Having a variable-rate mortgage
- No maintenance fund for predictable repairs
- Student loans larger than any potential salary
- Spending all of a lump sum when a chunk must go to income taxes
- No prenuptial agreement to protect your assets
- Hiding debts from your partner
- Not adjusting your spending for a drop in income
- Having children without mapping out all of the costs
In each case, these time bombs are created from making decisions without any financial literacy. Unfortunately, the consequence is always painful and undesirable choices that impact your physical reality. Each one of those time bombs listed, and many others, can be diffused. This is done by mapping out your financial life, to make better choices, long before these events occur to prevent blow-ups.