A lot of consumers are mismanaging their finances which leads to being financially unstable in life. There are a lot of consumer qualities that will lead to financial problems and you need to be aware of these to prevent self-made problems. There are a number of financial pitfalls that seems to the own doing of the consumers themselves.
This is similar to people who are working hard to get the lean physique that they want and spend countless hours in the gym and other sports. They spend a lot of time exercising their bodies just to reach their goal. But at the end of the day when they are all tired and swollen, they binge eat or reach for that tub of ice cream.
These actions negates all the efforts already put in sweating and lifting weights. The same with how some consumers get into financial problems along the way. It can be from their own actions and they are unconsciously digging into their own problems. It is hard enough to face the problems that come your way but creating them on your own is a whole new layer of complications for the budget.
Debt is troubling especially how NewYorkFed.org broke down some of the loans that consumers are holding onto. At the end of 2014 and taking out mortgage loan, student loan took the top spot at over $1 trillion followed by auto loans at and credit card debt. All these loans are beneficial to the lives of consumers but how do you know that you are already financially overextending yourself?
How to know you have financial problems
There are telltale signs that you are already unstable with your finances and you need to be able to see these signals even before they cause irreparable damage to your finances. Here are some of those forewarnings that you need to keep a close eye out for that are actually clear signs that you are already financially unstable.
- Your credit card bill is much more than you can handle. Nerdwallet.com shares that the an average household has about $15,611 in credit card debt alone. This is alarming considering that there should never be a balance to begin with. One of the cardinal rules of buying with credit card is that you need to be able to settle the full amount at the end of the month. If you cannot do that, you need to pause and re-evaluate your card purchase. If you find yourself continuously using your card to pay for various purchases but unable to meet the payment and roll over the balance to the next month, your finances might already be in jeopardy.
- You always run short even before your pay comes. If you notice this trend, you need to carefully reassess your spending habits. It is hard to try and live with a budget that always seems to run short a few days away from payday. This is a clear sign of being financially unstable because you cannot even make ends meet.
- You are not increasing your retirement fund. There are couple of retirement factors that you need to keep in mind and one of the seemingly most simple but often overlooked aspect of retirement planning is to continuously increase it. It is not enough to plan to put a sizable amount at the end of the year and not push through with it. It is better to put in small but frequent contributions to your retirement nest egg to increase it over time. If you are not able to add anything to your retirement fund. you will feel the pressure mount as you grow older.
- You fail to put money in your reserve fund. In order to understand how important your emergency fund and rainy day funds are, you need to put yourself in a position where you are financially caught off guard and you have nothing but your reserve funds to tide you through. You will then learn that the bigger your funds are, the more it can be of help to you and your family. If you are not able to increase your reserve funds while you have the ability to, you might not have enough when disaster strikes.
- Financial stress is a constant companion. This is one clear sign that you are financially unstable because stress is a warning sign that something is bothering you. You already know that there is a problem and if you do not deal with it, stress takes over. It is already hard to make financial decisions when you reach a point that you are already stressed out. Be sure to keep an eye out when you are already feeling stressed to help make better financial decisions.
Tips to get through a chink in your finances
When you are already having problems with your finances, it does not mean that you have to stay there and sulk all your life. You need to take control and change your ways to get a grip on your budget and finances. Here are a few things you might want to consider when you feel you are already financially unstable and want to get out of it.
- Assess your budget and identify areas you can improve on. The first thing you need to do is do a self check just like how you would go to a doctor when you are sick. When it comes to your finances, you can get a professional to look over your finances or you can sit down and pinpoint what you are doing wrong. You might be spending too much on fancy dinners every week or your clothes are taking up too much space in your closet already and you are not even using half of them. There are a lot of benefits of downsizing the budget and it might be all you need to get back on track.
- Put a plan together and follow through with concrete actions. It is not enough that you identify and put a plan in place to address your financial problems. You need to follow through with concrete actions to address the unstable financial situation that you are in. If you plan to live below your means then you need to commit and let go of those fancy dinners or buying useless gadgets that you already have too much of.
- Be flexible enough to adjust along the way. Change is constant and you will see this often in life. What might have worked for you today might not be such a good idea tomorrow. With that being said, you need to be financially flexible and be able to adjust your plans as you go along. If you need to increase your reserve funds in anticipation for a job loss then do so. Do not get stuck with an emergency fund that is not enough to last you a couple of months as you look for job.
- Know how being an active and passive investor plays a part with age. With age comes caution and you need to be able to distinguish being active and passive in investing. Investopedia.com shares that being passive with investments is geared towards long-term gains and being active or aggressive is just the opposite. As you grow older, you might want to change gears to one that is more passive and safe options.
If you are financially unstable, you would want to do a quick check on how you are managing your finances. As soon as you pinpoint the areas that needs to be fixed, do not hesitate to make the necessary changes.