Identify Financial Problems then Build a Budget

Identifying the source of your financial problems is the first step to correcting them!  While some causes are more evident than others, sometimes the financial stress is caused by a behavior rather than a more evident cause like divorce, loss of employment, medical issues, etc.  The good news is that your behavior can be altered or controlled.  If you shop because it releases stress, consider exercising instead.  Or, if you like to buy big-ticket items just because you want to, challenge yourself by starting a savings account instead, and make yourself wait until you save up the funds. Also, if you overspend or buy items simply because you want to, then consider making a list and try to only buy what is needed.  When you buy items on credit, you may not be considering how long it will take to pay that one item back!  Even if it is on sale, it could take you twice as long to pay back if you only make minimum payments on your credit card, and by the time you do pay it back, you likely could have bought three of that one item!

Here are some common causes of debt which may help you to identify the source of your financial hardship:

Expenses outweigh Income: If you have a reduction in pay, it could make it difficult to keep up with daily expenses, which can lead to falling into debt or borrowing money.

Divorce: Generally, couples that are facing divorce usually have challenges with finances which can cause major stress for all parties.  If you can come up with a plan together, that is usually more beneficial for everyone.  If you cannot, then a lawyer, legal aid, or mediator may need to be called.

Excessive Spending: It is so easy to swipe a card and walk away, but spending beyond your means can result in debt!  Sometimes it is difficult to pay back, and interest rates can increase when balances go up.

Unemployment: To get through being unemployed, adjust your spending habits, prioritize expenses and seek help where available. Check with local resources such as Food Stamps, Utility help, Unemployment Compensation, etc.

Compulsive Gambling: Some people become compulsive spenders which could become detrimental to their finances and well being. Before they know it, they are in serious debt and could face bankruptcy.  The first step to recovery is to admit that there is a problem. Consider checking with Gamblers Anonymous if you or a loved one has difficulty with gambling addiction.

Medical Expenses: Without insurance, the cost of medical expenses can be extremely expensive.  No one knows when an emergency may arise, so it is best to have medical insurance if you can afford it. If you cannot afford a private policy, ask your state if you qualify for their benefits. 

Now that you have a better understanding of potential financial problems, start improving it and build a budget!  Start small by saving $5 a week or $20 a month.  If you can save more, then do so. Also, try to earn additional income wherever possible. See if you can request a raise, work additional hours or overtime, or apply for a promotion. Also, encourage all family members to seek employment, even if only on a part-time basis. 

Clearpoint has been helping consumers with their personal finance goals and debt repayment strategies since 1964. Today, we work with consumers all over the country through counseling that is administered online, in person or over the phone. Learn about our services today!

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