Financial problems persist on a daily basis simply because challenges is really part of life. The problem is that we make it harder than it should be. Your inability to manage your finances compounds the problem even more. Managing your day to day funds to steer your finances towards your goals is already a lot of work. The last thing you need is complicating the process.
Debt management is able to help you get a good handle on payments. Just like how debt consolidation gives you the chance to streamline your payments. However, as you use this program, there are a couple of sneaky financial problems that can throw you off course. They can catch you with your guard down.
It is important that you strike a balance between debt and repayment. Time.com explains that in a good or bad economy, Americans seems to always have credit card debt. This is just one of the possible sources of debt problems. You still have your mortgage and car payments, student loans, and even your daily budget to think about.
Here are a few sly financial problems that can sneak up on your budget without you knowing it. It is better to be on guard and know these things. It helps you be better prepared in tackling them head on.
Overlooking infrequent expenses is one of the financial problems
One of the sneaky financial problems you might not realize is looking past infrequent expenses in your budget. What makes this challenging is that the expense item does not regularly show up in your expenses each month. It can be a quarterly or even an annual expense that you have to attend to. There would be times that you tend to forget about it and worry sets in when you realize you have to make a payment.
One thing you can do is to break them down in monthly installments so it does not catch your finances off-guard. This also gives you the chance to save up for it little by little every month. Doing this keeps you aware of all your expenses regardless of the payment date. It keeps your stress level low as well knowing that you are slowly saving up for the payment.
Relying heavily on irregular income
You might not have thought that income can turn into a financial problem but it can be. Irregular income can be a pleasant surprise depending on how you treat it in your budget. If you plan without it then it would be a pleasant surprise when it comes. If you factor them into your regular budget then that is where the problem starts.
Irregular income can ruin your budget when you expect to receive it but they do not come. You fall short on your budget and left trying to cover the shortage. Remember that you can save money even with a low income but it is difficult to budget when you factor in irregular income. The best thing to do is to plan without it so if it comes, you have extra money.
Conveniences in life can also pose financial problems for your budget. Take your subscriptions for example. You have one for your favorite magazine, cable, and even a gym membership. You might not pay much attention to them since they only cost a little every month. However, you need to understand that they all add up to a significant amount when put together.
Fortune.com shares that cord-cutting has been picking up the past few years that about 20% of U.S. households were cable free as 2015 ended. You need to take your subscriptions into account and audit those that you need. Streaming services are starting to pick up as a great alternative to traditional cable services. Check also if you are able to maximize your gym membership. There might be free activities in the park that you can take advantage of.
Zero percent interest rate
There is no doubt that credit cards can help improve your finances. A 0% interest card can be a great tool for consolidating debt. You just have to be aware that most of these are introductory offers and will expire after a few months. If you are using it to pay down a significant card debt through consolidation then that is fine. If you are jumping in just for the zero percent then you are in for a rude awakening.
Remember that is just an introductory offer and would expire after some time. You might have cut your other cards because you want to take advantage of the zero interest rate. After the real interest rate kicks in, there might be a chance that they are higher than what you used to have. If they are just the same then you traded off credit history and your score could suffer.
Putting a small down payment on a house
Another one of the financial problems that you might be struggling with is your house payment. If you are house hunting and looking at your finances, you need to take a close hard look at your downpayment. There are now options to put in a small equity on a house. However, you need to understand that this could potentially cost you more down the line.
One of the problems you will encounter is having to pay private mortgage insurance or PMI. This is meant to insure your lender in case you cannot pay the whole loan. You also have to pay more interest on the life of the loan. This is because your principal amount is high, to begin with. The sad part is that you would not notice this because you pay small amounts every month.
Thinking retirement is too far down to worry about
Gallup.com shares that the average retirement age for Americans is now at 66 years old. They go on to add that there are people who see themselves working well into retirement age. Though there are a lot of factors that goes into this decision, one of them would be finances. To be specific about it, there are consumers who did not save up for retirement.
The way it works is that the earlier you start planning and saving, the more you have when you want to retire. This is because compound interest will do its job in, well, compounding your funds. If you wait and believe that it is still a long way to go, you lose potential earnings. Start early so you can retire when you want to not when you need to.
Emergencies will never come
Financial problems also love to take advantage of your lack of preparation. Especially when you have a habit of believing that emergencies will never happen to you. You have been good all your life so surely only good things will come your way. And then life decides to take a drastic turn and you find yourself strapped for cash.
Your best strategy in these instances is a great defense through proactive preparation. You need to make sure that you contribute to your reserve funds over time. This ensures that you have something to pull out in cases of emergencies. You might find that your car needs a sudden expensive repair or that your washer suddenly breaks down. Your reserve funds help you address these unforeseen
Financial goals are a waste of time
As you manage your finances, it is important to see the big picture. This would be your financial goals both long and short-term. The moment you start to believe that you do not need goals is the moment your finances would crumble. This is because your goals serve as your anchor in putting together any financial plans.
Your long and short term goals need to work hand in hand and complement each other. Your long-term goals can be broken down into small and manageable steps. This can be your short-term goals spread out over time.
Your financial problems can be both big and small and sometimes, the smallest ones are the hardest to correct. The best thing you can do is to identify what these are and correct them as you go along.