Regardless of whether it is sudden or not, financial distress is one of the most challenging things for individuals or families to deal with.
Many different things cause financial problems, which can come in two main forms: one-time fees and recurring expenses. The best way to handle your financial problems is by addressing them early, or being aware of your fiscal situation ahead of time and building up a safety net against emergencies.
Enough with the general advice. If you’d like to know the four most common causes of financial problems and how to avoid them, continue reading.
Causes of Common Financial Problems and What to Do
Poor Budgeting
As you pass through the stages of life, your expenses change, along with your priorities. Unless you have a good foothold on budgeting, you’ll likely face at least one significant financial burden in your life.
Budgeting helps structure your finances and put your life into perspective. Proper budgeting gives access to liquid cash for quick monthly expenses and allows you to save to reach your financial goals. Without proper budgeting, you’ll have difficulty accessing money in your time of need.
Individuals with poor financial management cannot deal with sudden situations well either because they don’t have money to spare or haven’t amassed enough to handle large expenses.
What to Do
One of the best ways to fix your budget is to manage it while keeping in mind future goals. If you are saving money for a car, your kid’s education, a vacation, etc., be aware of how much you need to put away to make your dreams a reality.
Additionally, try to re-work daily and monthly expenses. Do you really need that $8 cup of coffee? How about a new pair of shoes? Prioritize getting out of short-term financial jams because those can grow into larger problems over time with interest.
People structure their savings in many ways, but saving around 30% of what you earn is widely recommended by financial experts. Ultimately, your short-term and long-term financial goals and expenses should determine how you manage your money.
Medical Expenses
Saving for and paying medical expenses is extremely difficult for most American families. Medical bills wreak havoc on families’ finances, whether a broken bone or something more severe like a chronic illness or terminal disease.
41% of American adults have some form of medical or dental expense, and 24% of adults have past-due medical bills. Medical expenses are unavoidable throughout life, which is why so many people fall into financial ruin because of them.
What to Do
When faced with medical expenses, make sure the amount you are being charged is accurate. Billing mistakes happen more frequently than you think, so make sure you actually signed a contract to pay for the expenses you are being charged for.
Additionally, sign up for a payment plan and discuss your financing options with the medical center. Try to negotiate for a reduced rate by paying in a lump sum or over a shorter payment period.
Many loan options and government discounts are also available to help with medical bills. If you don’t already have health insurance at the time of illness or injury, look into state options like Medicaid and CHIP.
Lack of Long-Term Planning
Lack of Long-Term PlanningMost people tend not to realize how much you need to save in advance to be able to retire at a young age.
Age is the main determining factor in how much you can save for the future. If you haven’t begun planning how you’ll save for retirement by the time you reach your mid to late 20s, you are in for a rough start.
Working becomes more difficult when you get older because you have to deal with poor health, lower energy, harsher work standards, and a changing work environment. Long-term planning helps you retire early, so you don’t have to deal with the stress of working in the future workforce.
What to Do
The quickest way to improve your financial health is through long-term planning.
With skepticism towards the long-term viability of social security and other government-based retirement planning options, individuals need to diversify their long-term savings options.
Set up a savings account, put 15-20% into your 401(k), set up an IRA plan, invest in the stock market and mutual funds alone or with a financial manager, and contribute to a life insurance plan. Also, negotiate with your employer to match your 401(k) contributions.
Savings deposits grow most efficiently with interest over time through compounding.
Compounded Debt
If you want to stress less about money, pay up on your past debts. Compounded debt is a monster that can grow into over double the original amount you borrowed.
It is important to live comfortably, but once the burden of compound debt takes over, you’ll have to deal with bills for many years.
There are many reasons to take out loans where interest will build up over time. However, the most common reasons are buying a home or car and for business projects.
What to Do
Re-negotiating your loans for better terms is the best long-term option for dealing with compounded debt. If your finances are backed up for the month, you can also take out a short-term loan like a cash advance, payday, or online instant loan.
Try to ensure that your financing option is fair and fits your budget before taking it out. If possible, save up more before taking out a loan to deal with compounded debt.
“Need Money Now?”
When most people get into poor financial situations, they get hit with fees and expenses like a storm. The best way to ride the storm and escape your poor financial situation is with a flexible loan option like an installment loan.
Take up to six months to pay back your installment loan of $1,250 from Power Finance Texas. Our customer service agents work with you to ensure you are never burdened or stressed when paying back your loans by giving you ample time and advice to help you budget your finances.
Apply here today if you need cash fast with an installment loan.