Financial problems can be an issue regardless of your current status and income. You might have lost a job, taken out a significant amount of debt or you and your spouse just had a baby. It’s also not uncommon for people to live from one paycheck to the next, never able to really secure a stable future. By overcoming many of the most common money problems that people face, it’ll be easier for you to reduce the stress and frustration that you’re currently dealing with on a regular basis.
In order to overcome many of these problems, it’s important that you make changes to how you spend and save every day. If you continue to live the way that you’re currently spending and saving, you’re less likely to eradicate these issues to obtain a more financially stable future. If need be, you can even work with a financial adviser, who will be able to help in terms of setting up a budget, paying off debts and investing what you currently earn.
1. Crippling Debt
Most Americans are in some form of debt. You might have old credit cards that were maxed out and are costing you a small fortune every month when you pay them. For a lot of people, old student loans are due upon graduation, creating a literal pile of debt that is almost impossible to work on paying off. This common problem can really be a hindrance to your happiness and ability to plan for the future. There are several different ways that you can eliminate these debts or significantly lower them. The first, and often most beneficial, is to review what you need to know about consolidation with Earnest, which includes taking multiple student loans and lumping them together onto one account. Consolidation is beneficial in that it lowers your monthly balance, reduces billing frustration and provides you with a lowered interest rate. Another way for you to reduce or eliminate debts is to refinance them. This involves taking a high-interest, short-term loan and taking out a new account with a lower rate and longer term. As a result, you’ll have much more affordable monthly payments over a longer period of time.
2. Lack of a Budget
If you’re an over-spender, like a lot of people are, you probably think nothing of purchasing things that are expensive or that will significantly impact your current bank balance. This means that you’re not living on a budget, and you’ll often experience major financial difficulties as a result of your lifestyle. Budgeting doesn’t have to be hard, and it doesn’t have to mean that you are unable to buy anything that is considered non-essential. However, when you create and live on a budget, you’re less likely to see a severe reduction in the amount that you have in your bank. Budgeting involves taking your income to debt ratio and figuring out what you’re left with at the end of the month. From there, you can designate what you want to spend the leftover money on and how much you want to put away into a savings account.
3. Not Prioritizing
Many people don’t necessarily realize that there is a difference between something that is a want and something that is a need. For example, you might go into a store and see the latest and greatest tablet, but the tablet you currently have at home is still working perfectly fine. Rather than spend money on this want, you skip it and instead by the new home appliance that you need. This is called prioritizing, and it’s an essential part of living a financially stable life. If you don’t have the expendable money for something that you want, you need to avoid the temptation to actually buy it. This provides you with the cash to put towards more necessary expenditures, such as repairs on a car, a new appliance for the home or emergency medical bills.
4. Avoiding Planning
In order to live a financially stable life, you need to plan ahead for the future. Sure, no one ever really knows when an emergency will occur. However, if you’re not prepared for a crisis situation, you’ll typically be left with a mounting debt and the inability to compensate for these expenses. This is why it’s important that you plan ahead as often as you can. You need to have some type of emergency fund set aside with at least $1,000 in it. This fund can and should be used only for crisis situations, like when you lose your job or need to buy a new appliance that’s recently broken down. Likewise, you need to start making plans for your future retirement. No one wants to have to work for the rest of their lives simply because they never saved up or put anything into a special retirement fund. The sooner that you start saving up for your retirement, the more money you will have for those golden years.
5. Living Paycheck-to-Paycheck
One of the most common financial problems faced by people all over the world is that they live from one paycheck to the next. This is a major issue because it leaves very little wiggle room if an emergency occurs. If you miss one or two paychecks, you’ll essentially be broke without any money to fall back on. Getting away from the check-to-check mentality can be difficult, especially if you’ve been living this way for most of your adult life. However, it’s incredibly beneficial to your future and your overall financial stability. One way to stop living this way is to avoid overspending each week. It’s not uncommon to get paid on a Friday and for most of the money you earned to be gone by Monday morning. The reason for this often has to do with weekend spending, which can be tamed by finding free or low-cost activities that the family can enjoy. Another way to stop living check-to-check is to start saving up. Creating a savings account and automate transfers so that money is put into this account every single week.