Money…not having enough can cause issues, but so can having too much. Budgets are challenging and emergencies that require cash may come up. Problems can occur quickly. However, knowing the causes of financial problems could help you avoid them.
And since money can affect a lot more than just your wallet, like your stress levels and relationships, it's worth hearing about. Here are some common financial problems and how to fix them!
But first, let's define what financial problems are.
What are financial problems?
A problem, big or small, is essentially a situation that needs to be resolved or overcome. Ideally, you need to find a solution to problems you have because they will only worsen and aren't good for your life. That said, financial problems are those problems that relate specifically to money.
Financial annoyances also exist, but they aren't the same as problems. A financial problem requires deciding what to do, like an expense you didn't plan for. An annoyance may bother you but you can overlook it, like your significant other going $10 over budget and buying something unnecessary.
Annoyances can become problems if they're part of something bigger, but sometimes things just happen. If it isn't connected to a more significant issue, feel free to not stress and leave it alone. But if it keeps coming up, it's a problem.
What are the causes of financial problems?
Every issue has a root cause, and it will likely keep coming back until you deal with the cause. Here are some reasons for common financial problems.
1. Lack of planning
If you feel disorganized about money and don't plan anything, you will likely experience problems. If there's no goal for the money, it can prevent you from having what you need to pay your bills, and it can throw you off if a large expense pops up out of the blue.
When you don't make plans or organize your cash, you leave yourself open to problems.
2. Unforeseen circumstances
Certain things can't be planned for. For instance, a medical bill or financial emergency may sometimes happen with no warning. If this happens more than once in a row, you may exhaust your emergency fund, and it isn't because you didn't plan.
Unforeseen circumstances can keep you from your goals even if you are on the right path with money.
3. Not enough money
If you don't have enough money, everything will feel like a problem. This might be due to an expensive payment that takes most of your income or not making enough from your paycheck to make ends meet each month.
Whatever the reason, not having enough money will definitely be a problem for your budget.
4. Lack of education
Even if you make a good income and have some savings, without financial education, mistakes are pretty likely. A lack of financial education is simply not knowing enough about money or how it works.
When you don't have enough information about money, it's easy to fall for get-rich-quick schemes or invest in the wrong thing, making a mess of your budget.
5. Family issues
This is a big problem - family can affect finances. If you and your spouse disagree on how to handle money, or you have a family member that constantly asks you for cash, it can throw you off from reaching your money goals.
Family issues can keep you from making a budget or stop you from saving money due to differing opinions, and it can definitely cause stress.
Types of financial problems
Most money issues fall into a few categories. Here are the main types of financial problems.
Relationship-based causes of financial problems
Disagreements or stress about money in your relationships can be a real problem. For example, maybe you are stressed by a particular family member who always wants you to invest in their new business idea. Or you want to pay for your children's college but cannot afford to do so.
Relationships and money can quickly become problematic when there are disagreements. According to Jimenez Law Firm, differing opinions on managing money are a big issue in marriage and may affect divorce rates.
That's why it's essential to communicate about your financial goals and create a system you both can stick to.
Knowledge-based causes of financial problems
If you don't know enough about money, poor decisions are easy to make. A missed opportunity, a loss of savings, or an investment gone wrong can all happen without financial education, and it's one of the big causes of financial problems.
This is easy to fix with some basic money education, and thorough research before putting your money into investment or savings accounts.
Self-control based causes of financial problems
You can make all the money in the world and then spend it all and be back at square one. Lacking the discipline to stick to a budget or spending money when you know you shouldn't are self-control problems that influence your finances.
It will be hard to achieve your dreams if you struggle to tell yourself no. In order to be successful with money, practice spending and saving in a way that you decide on in advance, and avoid impulsive decisions.
Income-based causes of financial problems
Not earning enough money from your job isn't one of the types of financial problems that will just go away. And not having enough cash can certainly throw off your financial goals.
Examples of common financial problems
Now you know the causes of financial problems and the types of issues that are out there. And maybe you relate to some of it. Here are some examples of common financial problems to help you figure out what to do next in your own situation.
You can't pay bills because there's no budget
One common financial problem that feels big and immediate is the inability to pay for things you need because the money was spent already. This can happen when money isn't budgeted or if you struggle with self-control.
If this occurs, it can be pretty scary, but the best thing to do is sit down and look at your bank account. Make a budget to pay for the most important things first with whatever money is left.
Then look into other options like selling items around the house or using a credit card if necessary. Remember, a credit card is not a long-term solution but something to do in an emergency, and it shouldn't be repeated.
The next time you get paid, try paying all your bills first, including paying off credit cards. Then make a plan and follow it, so you don't have to deal with anything like this in the future.
Your car breaks down, but there are no savings to fix it
Out of nowhere, your car breaks down! And you don't have the money to fix it. A situation like this can be frustrating, but you probably have more options than you think.
Your immediate concern is probably how you'll get to work during the week. For a short-term solution, ask a family member or friend for a ride or if they have a vehicle you can borrow. Also consider public transportation, like the bus system, or use a bike.
But this isn't going to work long term. Begin to save up any extra money you can, and consider a side hustle to get the money for the repairs. Once the car is back to normal, work hard to save up a car fund for future maintenance.
You lose money in a bad investment due to a lack of information
Sometimes an idea can seem great until it completely fails and backfires. If you put your money into a bad investment due to a lack of research or understanding of money, you might not know what to do next, and it's one of the causes of financial problems.
Depending on what happened, you may be able to get your money back. Try that first. But if not, the funds may be lost. Either way, determine to do a lot more research in the future before investing in anything, and never put money in an investment or fund you don't understand.
Your partner makes a financial decision without consulting you
You look at your bank account and find that your partner has spent money without talking to you about it! And not a little, but a lot. This can be frustrating and make you feel like your opinion doesn't count.
The first thing to do is talk to your partner and find out why they made this decision. Try to hear their side and tell them your own opinion and how you felt about the situation. From there, it's crucial to come up with a plan about how you'll handle big purchases in the future.
If you find that your partner is unwilling to discuss the purchase or doesn't want to be a team about finances, it might be time to look into counseling to see if you can get on the same page.
Saving gets boring, so a shopping spree happens
Overspending because you're tired of saving is a self-control issue, and it can happen to anyone. If you're very strict with your budget or have been saving for a long time, you may snap one day and go over budget, making it challenging to pay bills.
If you did this, the first thing to do is assess the damage. Check to see if there are any purchases you can return, and do so immediately. If you find that there's still not enough to pay your bills, try selling some items that you bought online.
In the future, give yourself some spending money, so you don't feel too restricted, but remember to make paying for expenses your priority.
How to solve financial problems in your life
Now you've seen the types of financial problems with examples. But you need to know how to solve financial problems for good. After all, it can improve your life in a variety of ways.
Finances can be associated with your mental health. On another note, with healthier finances, your relationships may improve, your retirement could be better, and so on. Here are some suggestions for how to solve financial problems.
1. Identify the issue
First, figure out what's really going on. Remember, the symptom is not the same as the real issue. The symptom may be overspending, but the real problem is a lack of self-control with money.
Figure out what the causes of financial problems are and start by working through that. Depending on the issue, you can do this in several ways, from journaling to talking things out with friends or your spouse to setting financial goals.
2. Increase your financial literacy
More education about money is never a bad thing. Invest in yourself by taking some of our free financial courses. Also, read books, listen to podcasts, and have conversations with people you know that handle money well.
Once you truly understand financial terms and have information about investing, retirement planning, and saving, you'll be much more comfortable handling your money.
3. Have tough conversations
This isn't fun, but sometimes it's inevitable. It may be necessary to have some difficult conversations with people if they are part of the financial problem. This would generally be your spouse, a family member, or a friend.
While it can be tough to say how you feel and set boundaries, it's important to do so. Otherwise, you may wind up without enough money, or you might be unable to do what you want to do financially.
4. Be willing to delay gratification and be self-disciplined
Is this hard to do? Yes. Is it worth it? Absolutely! Delaying gratification and being self-disciplined is an art, really. And it's essential for your financial progress.
Decide on guidelines for your spending and saving, depending on what you value and find most challenging about money. Reward yourself often and stick to your goals, and soon you'll realize that delaying gratification pays off in the long run.
5. Make more money
Another way to solve financial problems is to make more money. If the issue is that you can't pay your expenses or want to save for a big goal, more money can certainly make this possible.
This may involve requesting a higher salary, or you may need to change jobs or look for an additional one. While it may be a pretty busy schedule for a while, it can eventually help you get to where you want to be.
6. Monitor your progress
Money isn't something that can be dealt with once and then forgotten about. It constantly comes up in your life, so having a sound system to monitor your progress will help.
You can do this by budgeting, tracking your savings goals, and looking over your finances each year to see if you're building wealth.
Solve financial problems by leveraging these tips!
Left unchecked, common financial problems can overwhelm you. But with some planning, education, and discipline, you can overcome all of it.
Remember to identify the real problem and monitor your progress to see real results and solve financial problems for good.