It’s very common to hear that money can’t buy us happiness, but it sure does pay our bills, and that definitely makes us happy adults. Avoiding financial stress can help us live a more peaceful life, and knowing the important factors of our financial situation can lead us closer to being more at ease. If you’re stuck in a financial rut and find yourself constantly failing, below are some possible explanations.
You Don’t Exactly Know or Understand Your Current Financial Situation
To fix a problem, you first have to know what exactly the problem is, right? Therefore, the first thing you’d want to do to improve your financial situation is to understand it. To begin with, it’s important for you to know your net worth, your cash flow, as well as your credit score. With this information, you would have a better idea of where to go next.
Look over your bank accounts, know which loans you’ve taken out, find the exact amount you owe credit card companies. It might seem daunting to face your financial problems head-on, but this is the only way you can ever escape a financial crisis: by learning what it is you’re up against.
You’re Living Above Your Means
We’ve always heard the adage “live below your means” but always take it for granted. It would all be fine and dandy if money replenishes by itself, but the reality is that we need to be very careful with how we spend. Especially if you ever intend to get out of a financial rut, being careful with how you spend is crucial. Go over your current expenses, from how much your groceries cost to how much you need to pay for your home mortgage loans or credit card.
This is where your budget will begin. Add a measure of safety on top of it, and that’s how much you should be living. Any more would be spending too much and any less would be welcome, but impossible.
You Treat Your Credit Like Another Source Of Income
If you’re already in deep debt, then the sensible thing to do is to lay off the credit card. It will only incur you more debt and will dig you even deeper. Close all your current credit cards, and look up debt refinancing or consolidation. Your efforts must be to completely pay off your debts first and to improve your credit score. Doing this will put you in a better position to maneuver financially: it will allow you to purchase a home or care, or other things that can enrich your life (like an education). The sooner you clear off your credit card, the sooner better horizons will come.
You Don’t Set a Budget
Spending without a care for the world is a dream many have, but that doesn’t mean you should try to live it right now. As mentioned before, you need to live below your means. And you can do this by setting a budget for yourself. It’s not to restrict you and your options, but it’s there to help you avoid overspending.
Consider using expense tracking apps. These types of apps allow you to list down all the things you purchase, creating an extensive log of your financial decisions. You can later take a look at this and judge whether you’re still in the red or making progress. Having a financial tracker can help you a considerable lot, so definitely consider utilizing one.
You Justify Your Poor Financial Decisions
Of course, while it’s okay and good to spend for yourself, you still have to be careful not to overspend. This is especially true if you have debts to pay because you wouldn’t want to add more to your list of bills to pay. Don’t fall for aggressive marketing ploys and don’t deliberately go looking for sales because even if you think you’re saving money 10% less tag, think of how many items you’re actually buying. If you accumulate all the stuff you buy during a sale, how much do you actually save if you’re still spending over a hundred bucks?
You’re Not Studying Personal Finance
And perhaps, the most significant reason why your financial health isn’t improving is that you might not be studying personal finance. Managing your money isn’t something that comes naturally- it’s a skill. It’s something that’s studied, practiced, and constantly improved upon. Expose yourself to financial awareness, read books about investments, learn how the credit system works- this information will prove useful if you want your financial situation to improve.
To escape a cycle of debt and despair, you need extra effort, and that extra effort includes studying as if your life depended on it- only this time, you’re studying personal finance.