Countless people have lost sleep over debt and other budget disruptions in their families. And in some cases, the consequences of such financial problems can end up going far beyond insomnia, even causing health problems, such as gastritis and depression, to relationship problems. To this end, below are some tips on how to fix the most common financial problems your family faces.
Furthermore, if you’ve got financial problems in your family, don’t despair, you’re not the only one. This evil affects many families worldwide and has worsened in recent years. This is mainly because of the intense economic crisis and unemployment faced by many countries.
This type of situation is a series of illnesses, such as difficulty sleeping, headaches and body aches, social isolation, anxiety, and stress.
It is noteworthy that, although these are significant factors, these are not the only problems because many of the people who are suffering financially were not directly affected by the difficulties mentioned above.
To help you, we will show you in this article how to fix the most common financial problems your family faces. Read on and check it out!
How to Fix the Most Common Financial Problems Your Family Faces
According to a recent study, the percentage of indebted families in the world is over 72.3%. On the other hand, families with overdue bills, a total of 44.5%, and another 20% said they were unable to pay off their debts.
Indeed, the current economic climate contributes to these numbers. But is it just that? We cannot blame this fact alone.
Unfortunately, many are not in the habit of saving and creating a reserve for emergency or unforeseen periods, such as illness, unexpected vehicle breakdown, accidents, unemployment, among others.
As a result, the slightest unforeseen event forces them to seek credit, and the easiest way to get it is with an overdraft or credit card limit. Due to the high-interest rates, the debts turn into a snowball and leave the family in default.
Creating a financial reserve during good times, therefore, is the best way to avoid this type of situation. Preferably, this fund should contain an amount equivalent to at least three months of monthly household expenses. Even if you need to sacrifice, put 15% of your paycheck back into retirement accounts. Your best bet is also to save at least a 20% down payment so you can get instant equity and prevent private mortgage insurance, which is a colossal waste of money. According to Federal Reserve data, the U.S. household personal savings rate was just 3.1% In March 2018.
You may think that your debt costs over 19%, and your retirement account makes over 7%. Swapping the retirement for the debt entails that you will be pocketing the difference.
Improper use of credit card
When used wisely, the credit card is an ally of family financing. With this form of payment, it is possible to pay off some debts in installments without paying interest or have up to 40 days to pay off routine purchases, in addition to offering points, miles, and other advantages.
The point is that the credit card gives the illusion of purchasing power that does not exist. That is, those who do not have self-control can easily get lost, especially if they have cards from several brands and exceed in long installments.
Many people also end up using the card to take advantage of “unmissable opportunities.” They get carried away by promotions with the rationalization that the price is perfect and a unique opportunity.
The point is that, in most cases, purchased items are unnecessary for the family.
A tip for those who have difficulty controlling their daily family spending with their credit card is to book this form of payment only for extraordinary expenses.
Poorly planned investments
Eager to secure the future of the family or increase profitability, many seek to invest their capital. The big problem is when this happens without planning. A basic example occurs when opening a new family business.
The tip here is to plan and invest well. This alternative facilitates planning, generates considerable savings in the acquisition of what was invested, and has an excellent level of security.
Betting on an investment model that is less subject to market fluctuations than stocks, for example, is a good choice.
Consuming in excess
We can compare this problem to a prison. The more the family members consume beyond your ability to pay, the greater your sentence.
Being financially and physically healthy requires a long-term effort. That is, you must resist short-term temptations, keeping in mind that later gratification will bring much more results and satisfaction.
The key to leaving behind the habit of overeating as a family is to be very clear about your goals and the path you all need to take to reach them.
Abuse of debts in installments
The installment payment method is a great attraction used by retailers to increase sales from families. The first question most people ask before buying is how many times the product can be split.
This habit, however, is highly harmful. The key is to plan what to buy ahead of time and make financial reserves to get around this problem. Thus, you will have bargaining power and get good discounts when purchasing in cash, in addition to avoiding installment payments.
Receiving much less than you would like
This is a financial problem most family members face. Few people are happy with what they earn. It turns out that, despite wanting to make more, many people choose jobs that do not allow them to have financial growth. Or simply, it does not let them act and take advantage of opportunities that arise.
The result is that the person often becomes unmotivated, generates fewer results than they could, and decreases their chances even more. The best way to be recognized and increase financial gains is to stop thinking about money and focus on your delivery, your qualifications, your skills, and the results you generate.
Not being able to invest, even with a good salary
Do you know someone who earns a good salary but lives in family debt? The big problem is that these people often also raise the cost of living as they increase their pay.
The greater your need for money to maintain a pattern, the further away from financial freedom you and your family will be. The tip is to determine a percentage of your salary exclusively to be invested. That way, whenever you increase the performance, you will have an improvement in the standard. Though, this will be in a regulated manner and without compromising your present and future.
According to recent research, the world will have over 27 million unemployed in five years. As much as this is a situation that is beyond the individual’s control, the possibility of losing your job should be considered when planning your family’s financial life. The best way to do this is always to create a backup.
Many people don’t even think about what they would do if they lost their job or are under the illusion that they are 100% sure they will quickly get a new job. This can happen, but it’s always better to take preventive action and prepare for the worst-case scenario when it comes to finances.
Handling money recklessly
Among the habits you need to revise to improve the family budget, an important point is how you handle financial management.
Having a spreadsheet with everything on the record is the first step in getting organized. But it is also necessary to think about other points: do you usually look for the best rates on financial products and services?
By giving some thought to issues like these, you can begin to manage finances better and balance the household budget.
Frequently Asked Questions
How can families overcome financial problems?
Families can overcome financial problems in the following ways:
- Using credit cards properly
- Planning investments well
- Consuming moderately
- Handling money properly
What are the most common financial problems?
The most common financial problems are:
- Defaulting. This also entails excessive debt/Not enough money to settle debts – 11% Lack of funds/Low wages – 10% College expenses – 10%
- Improper use of credit card
- Poorly planned investments
- Consuming in excess
- Receiving much less than you would like
- Not being able to invest, even with a good salary.
- Cost of owning/Renting a home – 9%
- High cost of living/Inflation – 8% Retirement savings – 6%
- Taxes – 5% Unemployment/Loss of job – 3% Social Security – 3% Lack of savings – 2%
- Handling money recklessly
How do you fix financial problems?
You can fix financial problems through the following ways:
- Sort out what needs attention more
- Stay positive
- Use your income wisely
- Be realistic
- Be honest with yourself
What are the biggest financial mistakes people make?
The biggest financial mistakes people make include:
- Celebrating excessively on small wins
- Wrong market timing
- Borrowing excessively
- Having a wrong lifestyle
- Investing in the wrong products
What are the common family problems?
The common family problems are:
- Separation or divorce
- A parent or relative is having an illness, disabilities, or mental health problems.
- Financial crisis
- Natural disaster. E.g., Hurricane Irma hit the Florida Keys, destroying 25 percent of their buildings.
How can we solve family problems?
You can solve family problems through the following ways:
- Creating an environment that encourages sharing and love.
- Acknowledging the major problems
- Handling the deeper issue.
- Get professional help.
- Take proper care of yourself.
How can a family solve financial problems?
Family can solve financial problems through the following ways:
- Taking a Personal Loan.
- Co-signing a Loan.
- Creating a Bill-Paying Plan.
- Provide Employment.
- Prepaying Bills.
In conclusion, the world’s economic situation has changed and, often, even the family’s financial reality is no longer the same. As difficult as the problem is, you can work around it. Furthermore, as the saying goes, unity is strength. With the understanding and support of your partner and the entire family, it can be easier to overcome financial challenges. Also, according to a Gallup poll in June 2017, these are the primary financial concerns families are currently facing in the U.S. Hope you have learned how to fix the most common financial problems your family faces.
I am Lavinia by name and a financial expert with having a degree in finance from the University of Chicago. In my blog, I help people to educate by making wise choices regarding personal investment, basic banking, credit and debit card, business education, real estate, insurance, expenditures, etc.