Are You Struggling with Money? 6 Common Reasons for Money Trouble and Simple Ways to Fix Them
- Davina Jackson
- Oct 20, 2024
- 11 min read
Updated: Oct 27, 2024
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Are you constantly feeling like your finances are out of control?
Or maybe you’re wondering why, no matter how hard you try, your money never seems to stretch far enough.
Money troubles… Most of us have faced them at some point, and they can be overwhelming.
Whether it’s living paycheck to paycheck or struggling with debt, the financial stress of money troubles has a way of creeping into every part of life.
But here’s the thing: often, the root causes of money struggles aren’t just bad luck or an unexpected expense. They come from patterns or habits that we don’t always realize are working against us.
In this week’s blog post, we’re going to break down the 6 most common reasons behind money troubles and, most importantly, how you can fix them.
From living beyond your means to not having clear financial goals or investing in trendy (but incompatible) things, we’ll dig into why these issues happen and provide actionable tips to help you get back on track... and stay on track for good!
Are you ready? Let’s go!
Key Points
Living within your means and budgeting can prevent debt accumulation
Build an emergency fund to prepare for unexpected expenses
Focus on paying off high-interest debt strategically
Invest time in financial education to make informed decisions
Start saving for retirement early to secure your financial future
Be mindful of emotional spending habits and find healthier alternatives
Instant Gratification Zone: Skip to the Good Stuff
Money Trouble #1: Living Beyond Your Means
One of the most common reasons people find themselves in financial trouble is living beyond their means.
It can be easy to fall into this trap, especially when the allure of a lifestyle that seems just out of reach is constantly present with social media, peer pressure, and the desire to "keep up with the Joneses" encouraging you to spend money that you don't have.
But, consistently spending more than you earn is a surefire way to fall into debt and derail your financial goals.
So how do you “live within your means”?
It’s all about cutting back on certain expenses, reevaluating your needs versus wants, or finding ways to increase your income. (Or a combination of all 3)
Do this and you’ll see it payoff with increased financial stability, less stress, and the freedom to build a secure future.
How to Fix Living Beyond Your Means
Track Your Spending: Start by getting a clear picture of where your money is going. This will help you identify areas where you're overspending.
Create a Budget: A budget will ensure that your spending is intentional and aligned with your income. Make adjustments where necessary to prioritize essentials and savings.
Avoid Impulse Purchases: Before making any big purchase, ask yourself if it fits within your budget and if it's something you truly need.
Focus on Your Financial Goals: Instead of trying to maintain a lifestyle that doesn't match your income, redirect that energy toward building savings, paying off debt, or investing.
Money Trouble #2: Lack of Emergency Savings
Life is full of unexpected events - whether it's a medical bill, car repair, or even a job loss.
Without a financial cushion to fall back on, these emergencies can easily turn into debt - forcing you to rely on credit cards or loans, which only deepen your financial troubles.
Unfortunately, many people underestimate the importance of having savings set aside specifically for emergencies.
Building an emergency fund can seem daunting, especially if you're already living paycheck to paycheck. But having even a small amount saved can make a huge difference in how you handle financial curveballs.
It’s all about starting small and consistently putting money away for future peace of mind.
How to Fix a Lack of Emergency Savings
Start Small: You don’t need thousands of dollars right away. Set an initial goal, like saving $500 or $1,000, to cover small unexpected expenses.
Automate Savings: Set up automatic transfers from your checking to your savings account. Even $25 or $50 per paycheck will add up over time.
Cut Non-Essentials: Look at your spending and see where you can temporarily cut back - whether it's dining out less or pausing subscription services - so you can redirect more money to your emergency fund.
Prioritize It in Your Budget: Treat your emergency fund like a bill. Make it a line item in your budget and pay yourself first.
Building and maintaining an emergency fund may take time, but it's one of the best investments you can make for your financial health.
By preparing for the unexpected, you'll avoid the stress and debt that come with financial emergencies and keep your financial goals on track.
Money Trouble #3: High-Interest Debt
One of the most crippling financial challenges is high-interest debt, especially from credit cards, payday loans, or personal loans.
The high interest rates on these debts can quickly spiral out of control, making it difficult to get ahead. And, instead of paying down the principal balance, most of all payments go toward interest, keeping you in a cycle of debt.
High-interest debt often feels like quicksand where the more you struggle to pay it off, the deeper you sink.
Over time, the weight of this debt can limit your ability to save, invest, and even cover daily expenses.
It’s very important to understand how much this type of debt can hold you back and how crucial it is to address it.
How to Fix High-Interest Debt
Assess the Situation: Start by listing all your debts, their interest rates, and minimum payments. This will help you prioritize which debts to tackle first.
Focus on High-Interest Debt First: The avalanche method, where you pay off the highest-interest debt first, can save you the most money in interest over time.
Consider Debt Consolidation: If you have multiple high-interest debts, consolidating them into a lower-interest loan or balance transfer card could help reduce the overall interest you’re paying.
Negotiate with Lenders (when possible): Sometimes, you can negotiate lower interest rates or better repayment terms. It’s worth reaching out to your creditors to see if they offer any hardship programs.
Avoid Accumulating More Debt: While you’re working on paying down your debt, be mindful of not taking on more. Stick to a strict budget to avoid falling back into the cycle.
Tackling high-interest debt head-on means freeing up more money for saving, investing, and improving your overall financial situation.
The key is to have a plan, stay disciplined, and focus on paying down that costly debt as quickly as possible.
Money Trouble #4: Lack of Financial Knowledge
One of the biggest mistakes people make when it comes to their finances is not planning for retirement early enough.
It’s easy to get caught up in the day-to-day financial struggles where retirement seems like something that’s far away. But the longer you delay, the harder it becomes to build the nest egg you’ll need to live comfortably in your later years.
If you do not have a retirement plan, you risk running out of money when you need it most.
Social security and pensions may not cover all of your expenses, leaving you vulnerable to financial instability during retirement.
So, the earlier you start contributing to a retirement account, the more time your money has to grow through compound interest.
How to Fix Not Planning for Retirement
Start Now: No matter how small the amount, begin contributing to a 401(k), IRA, or another retirement plan. Time is your greatest asset when it comes to growing your retirement savings.
Maximize Employer Contributions: If your employer offers a match on your 401(k) contributions, make sure you’re contributing enough to take full advantage of that benefit - it’s essentially free money.
Diversify Your Investments: Make sure your retirement portfolio includes a good mix of asset types (stocks, bonds, etc.) to spread out your risk while maximizing potential growth.
Set Clear Retirement Goals: Have a clear idea of how much you’ll need for retirement and how much you should be saving each month to reach that goal. This can help keep you on track and motivated to build your retirement fund.
Remember: If you focus on long-term planning and make regular contributions, you’ll be better equipped to enjoy financial freedom in your golden years rather than scrambling to make ends meet.
Money Trouble #5: Not Planning for Retirement
One of the biggest mistakes people make when it comes to their finances is not planning for retirement early enough.
It’s easy to get caught up in the day-to-day financial struggles where retirement seems like something that’s far away. But the longer you delay, the harder it becomes to build the nest egg you’ll need to live comfortably in your later years.
If you do not have a retirement plan, you risk running out of money when you need it most.
Social security and pensions may not cover all of your expenses, leaving you vulnerable to financial instability during retirement.
So, the earlier you start contributing to a retirement account, the more time your money has to grow through compound interest.
How to Fix Not Planning for Retirement
Start Now: No matter how small the amount, begin contributing to a 401(k), IRA, or another retirement plan. Time is your greatest asset when it comes to growing your retirement savings.
Maximize Employer Contributions: If your employer offers a match on your 401(k) contributions, make sure you’re contributing enough to take full advantage of that benefit—it’s essentially free money.
Diversify Your Investments: Make sure your retirement portfolio includes a good mix of asset types (stocks, bonds, etc.) to spread out your risk while maximizing potential growth.
Set Clear Retirement Goals: Have a clear idea of how much you’ll need for retirement and how much you should be saving each month to reach that goal. This can help keep you on track and motivated to build your retirement fund.
Remember: If you focus on long-term planning and make regular contributions, you’ll be better equipped to enjoy financial freedom in your golden years rather than scrambling to make ends meet.
Money Trouble #6: Emotional Spending
We’ve all been there - a stressful day at work, a fight with a friend, or just feeling down. And nothing sounds better than a little shopping spree or dinner at a nice restaurant feels to lift your mood.
While it may give a temporary boost, this is emotional spending and can lead to financial problems over time.
That's because when you rely on spending as a way to manage emotions, it becomes easy to lose track of your budget.
So, while emotional purchases usually aren’t planned, they can add up quickly - regardless if it’s buying a little something you don’t really need or treating yourself a little too often. The end results can be havoc on your finances.
Plus, the relief or happiness from emotional spending is short-lived, and it often leaves you with guilt or regret.
By addressing emotional spending, you will regain control of your money, improve your financial health as well as your emotional well-being, and make room for spending on things that truly matter - like that bucket-list vacation to Paris or buying your first home.
How to Fix It Emotional Spending
Identify Your Triggers: The first step to stopping emotional spending is recognizing when and why you do it. Are you shopping because you're stressed, bored, or trying to keep up with others? Once you identify the emotional triggers, you can find healthier ways to cope.
Set Boundaries: Create a budget specifically for personal indulgences. By limiting how much you can spend on non-essentials, you’ll still be able to treat yourself occasionally without going overboard.
Delay Purchases: Implement a 24-hour rule for purchases. If you’re tempted to buy something impulsively, give yourself a day to think it over. This helps reduce impulsive decisions and ensures you're making purchases because you need or genuinely want them—not just to satisfy an emotional urge.
Focus on Non-Spending Alternatives: Find alternative ways to handle stress or negative emotions, like exercising, journaling, or talking to a friend. You’ll save money and find longer-lasting relief than from a shopping trip.
Noteworthy Mention: Investing in Trendy Things You Don’t Understand
A major pitfall when it comes to money troubles is jumping on investment trends that you don’t fully understand.
With the rise of social media, online forums, and viral news stories, it’s easy to get caught up in the hype.
You might see influencers or even friends boasting about their investment wins and feel the pressure to follow suit. After all, if everyone else is making money from it, why shouldn’t you?
But blindly following trends without understanding the risks can backfire, leading to financial losses and regrets.
That’s because many trendy investments are volatile and speculative by nature. Meaning, the potential for rapid gains comes with an equally high risk of loss. And without a solid understanding of what you’re investing in, you’re essentially gambling with your hard-earned money.
Do not fall into the lure of “easy money” or fear of missing out (FOMO). It will not work out well (trust me).
How to Fix Investing in Trendy Things You Don’t Understand
Do Your Research: Before putting your money into any investment, take the time to research it thoroughly. Understand how the investment works, what factors influence its value, and what risks are involved. If you can’t explain the basics of the investment to someone else, you probably shouldn’t invest in it.
Avoid the Hype: Be wary of media or social media-driven trends. Just because something is being talked about doesn't mean it's a sound investment. Resist the urge to follow what everyone else is doing without proper analysis.
Focus on Long-Term Goals: Trendy investments are often short-term, speculative opportunities. Instead, stick to a diversified investment strategy that aligns with your long-term goals and risk tolerance. Focus on building a solid portfolio with a mix of stocks, bonds, and other assets that you understand and that suit your financial objectives.
Consult a Professional: If you're unsure about an investment, consult with a financial advisor. They can provide objective advice and help you assess whether the opportunity aligns with your strategy and risk tolerance.
Stay Within Your Circle of Competence: Stick to investments that you understand well. If an investment seems too complicated or outside your knowledge base, it's better to pass on it than risk losing money on something you don’t fully grasp.
By steering clear of trendy investments you don’t fully grasp, you can protect your financial health and focus on long-term growth rather than short-term hype.
6 Reasons for Money Trouble: Take Control of Your Financial Future
Money troubles don’t happen overnight, and they’re usually the result of a combination of factors.
The 6 reasons for money trouble that we discussed - such as living beyond your means, high-interest debt, a lack of financial knowledge, or investing in trendy things you don’t understand - can feel overwhelming.
The good news is that every single one of these issues is fixable with the right approach.
Start by by being mindful of where your money is going, building up emergency savings, paying off debt, educating yourself, and setting clear financial goals.
The key is to remember that financial success isn’t about perfection. It’s about progress and those small consistent steps that lead to long-term financial health.
When you make thoughtful financial decisions, stay informed, and avoid common pitfalls, you'll be better equipped to secure the financial future you want.
So, take what you've learned here, apply it to your own situation, and start making better choices today. Your future self will thank you.
Taking control of your finances is not a one-time event but a journey that requires consistent effort and guidance.
That’s where The Woman CFO comes in.
Our coaching programs are specifically designed to help women like you break through these mental barriers and create personalized strategies that work for your financial situation.
If you're ready to take the next step, The Woman CFO's financial coaching programs are available now to guide you through transforming your mindset, building wealth, and achieving financial independence.
Book a free consultation today and learn how our coaching programs can empower you to reach your financial goals!