Definition of the Financial Problems

When you're having some kind of problem with money that makes you distressed and creates difficulty paying your bills, then you're having a financial problem. Financial struggles can range from not making enough money and overspending to feeling burdened with debt and having little savings. In some cases, you face such issues from economic causes beyond your control, but others can happen due to your money habits, relationships and emergencies. You have several options for dealing with a financial problem, and you can also work toward preventing those within your control.

You can think of a financial problem as any money issue that makes it hard to pay for your daily living expenses and debts. A financial problem can also make it hard to plan for the future, such as for your retirement or your children's education. Types of financial struggles can include:

• Income problems: Not having enough income to pay your bills is a very common financial issue. This can happen due to making low wages, not receiving regular raises, having limited promotion opportunities, getting reduced hours or losing your job entirely. You might also have financial problems if you make enough money but just enough to get by.
  
• Excessive debt: Whether you borrowed a lot for college or bought an expensive home or car, incurring debts adds to your monthly payment obligations and can cause financial struggles. Credit cards can add to the problem since you might rely on them to pay bills when you're low on income or feel tempted to make purchases you really can't afford. Your debts further add to your financial problems due to the high interest you might pay and the risks of late or missed payments.
  
• Spending habits: Overspending by making frivolous purchases and paying too much for items can drain your bank account and add to your debt. At the same time, underspending on things like insurance, maintenance, proper food and healthcare can lead to financial issues should an accident or health problem occur.
  
• Not saving enough: When you don't save money to help you through an emergency or plan for your future, you can face numerous financial struggles that leave you scrambling for a loan or hurt your quality of life. Vanguard recommends maintaining an emergency fund of three to six months of income but warns that the majority of Americans lack this amount. Lacking long-term savings for retirement can also lead to financial issues later in life.
  
• Investment issues: While putting your money in a savings account is quite safe, investing money in stocks, bonds and other investments will come with risks. If you invest a lot of money just to experience a downturn in the market, you can lose a lot of your savings. At the same time, you can experience financial problems if you don't invest at all since you're not getting any significant return on your money.
  
• Lack of oversight: It's easy to be so busy with work, family and life that you don't put time aside to manage your finances or plan for your future. However, this lack of attention means you have less of a picture of your financial situation and may experience an unpleasant surprise when you don't have the money you need. When you don't check your account balances or debts, it's harder to keep control and avoid financial issues.
  

Financial problems can happen due to reasons within and outside your control. Some common causes of financial difficulty include:

• Lack of financial knowledge: Some people end up with debt and credit issues due to not understanding how to properly manage their money and budget. If your family and friends manage their money poorly, you might even take up some of their habits unless you seek some basic financial training through school or on your own.
  
• Personality traits: If you tend to make decisions on an impulse, don't enjoy planning or have a desire to have things right now, you can easily end up living beyond your means.
  
• Economic factors: From a recession and rising inflation to low wages or layoffs, economic issues often beyond your control can cause financial struggles.
  
• Relationship issues: Whether you and your partner just manage money differently or you divorce, you can find yourself in financial hardship and debt without planning and good communication. You may even risk losing an asset like your shared home.
  
• Unexpected hardships: A car accident or medical emergency in the family can leave you with a large, unexpected expense or disability that makes it difficult to work and continue to pay your living expenses.

The most obvious impact of a financial problem lies in the hardships that happen when you can't pay your bills. While debts will accrue interest, you can end up paying fees or even losing assets like cars and homes if you can't pay your bills on time. You can also struggle to afford basic necessities like food, utilities, health care, transportation and housing. You may end up filing for bankruptcy or facing homelessness as a result of severe financial issues.

The American Association for Marriage and Family Therapy warns that financial problems can also have many physical and mental health consequences. Those struggling with money can develop anxiety or depression that hurts their quality of life and can even make them turn to substance abuse or self-harm. Even a lower level of financial stress can lead to problems with digestion, sleep and decision-making. Your relationships and work performance may also suffer, which can lead to further issues.

How to fix your financial problem will depend on the cause and specific issue. The goal should not be to just fix your short-term financial issues but to make a plan to also improve your financial situation for the future.

For example, if you're low on money in the short term due to a job issue or emergency, you might consider cutting your spending as much as possible, asking for help from family and friends, seeking any government assistance options or taking on a side job. If debt is the problem, you could stop incurring new debt, create a plan to pay off existing debt, seek mortgage or student loan assistance programs, consider debt consolidation or even file for bankruptcy as a last measure.

When your spending habits cause you trouble, make a budget, reconsider your lifestyle, start tracking all your spending and seek the root of the problem. You might also find it necessary to sell assets if an event like a divorce has led to financial struggles. Seeking the help of a personal financial adviser can be a good idea when you need a plan for saving money for your goals or need some advice on making better investment decisions and reducing debts.

While some financial struggles happen unexpectedly, you can do some work to prevent others and prepare for the unexpected. Some steps to consider include:

• Make a budget documenting your income sources, expenses, debts and savings
• Regularly check your bank and creditor statements
• Contribute to an emergency fund each paycheck if possible
• Pay more than the minimum payment on your debts when you can
• Regularly seek ways to cut expenses
• Analyze purchase decisions to prevent buying unnecessary items and to find good deals
  
• Consider obtaining new skills for promotion, better job opportunities or a side gig
  
• Start saving for retirement early, preferably putting away at least 10 to 15 percent of your income