Wouldn't it be nice to wipe out your financial struggles? (Photo credit: Images_of_Money)
I’ve seen the enemy and the enemy is me.
There is no corner of our everyday lives where this rings truer than our own family finances. Struggling to balance your family’s checkbook can arise from tragedy or the climax of poor decision making, but more often than not, difficult situations become dire by our own actions.
If you are in a difficult situation, I have no lectures, no disdain and no shame for you. I’ll let you be the judge of you. Instead, I’m going to point out the behaviors that will make a bad situation worse.
Ignoring Your Finances
I once owed over $12,000 in credit card debt on an annual income of $27,000. This doesn’t include student loans or car loans. I know what it’s like to come up short month after month. I hope that your family never feels the weight of that burden, because when the bills are stacked against you, it’s easy to throw up your hands and surrender.
Throwing in the towel is not that answer. Giving up usually leads to neglecting your situation and neglect only leads to more unpaid bills, fees, interest and a bigger mess. Your struggling family finances are like a bonfire, if you leave it unattended it can consume everything.
Missing Payments
It’s common practice for those struggling with their finances to pay a bill late when they don’t have the money to pay on the due date. This behavior is to be avoided at all costs. That’s because late fees are usually massive as a percentage of the overall debt.
Think of it this way. If you paid $10 for a late fee on a $200 bill, you just paid the equivalent of 5 percent more for your bill. Running up the same amount in credit card debt with a 24 percent interest rate would mean a cost of about 2 percent, alternatively. Generally speaking, you might have better options than accepting late fees.
One option for interest bearing bills is forbearance. Forbearance is a temporary period where your lender lets you miss payments without charging late fees. Usually, interest still accrues, but fees are waived. Essentially, it lowers your cost of delinquency and often all you need to do is ask for one.
You do need to be careful. Some lenders apply a forbearance fee, in which case, the forbearance may not be worth your trouble. You can forbear credit cards, car loans, mortgages and student loans. It’s not an optimal situation, but it’s better than paying tons of extra money for paying late.
Being Fooled by Hope
Hope is always a good thing to have, but it’s also easily misplaced on things that sound easy. Unfortunately, there is no such thing as an easy way out of your financial struggles. Playing the lottery is not a viable solution. A get rich quick scheme is certainly going to cost you time and money you don’t have. The hope of easy is what allows scam artists to swindle struggling families with false financial solutions.
You definitely need to have hope, but never put faith in the easy way out.
Spending More When You Ought to Spend Less
The worst course you can take in a challenging situation is to spend money like you are celebrating. There is a popular practice of ignoring a bad financial situation by spending money as if you weren’t struggling. Denial can feel good for a while, but how is multiplying problems supposed to benefit you in the long run. In the end, the repo man cometh.
Defying your debt is never the solution. It might be more fun at first, but solving your financial situation is about tough choices, not additional hours spent shopping at the mall.
Taking Up a Vice
Vices are expensive. Ask smokers. Ask drug users. Ask shopaholics. Not only will vices leave your current problems unsolved, they create new ones like poor physical health, mental health and damaged relationships.
Your current problems are worse enough. There no need to create new one’s through vices.
Even as I write to warn you, most people struggling with a financial situation will fall into one of these mistakes. Money problems are not easily overcome. It takes time, effort and sacrifice. Any solution that doesn’t involve these three things is guaranteed to make your situation worse.
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Great advice, John. There’s no Hail Mary football pass-style miracle that’ll solve your problems…and until you realize that, luck doesn’t seem to happen. While I have seen people get lucky and “things work out” it usually happens to people who’re hard at work as if there will be no magic bullet.
The hardest part is recognizing the problem and committing to change. If you can do that you’re on the right path.
I’m so lucky to have an older brother who makes all the mistakes so I don’t have to. When he ignored his credit card fees they grew out of control to the point where he wanted to kill himself. That was a lesson learned I’ll never forget. P.s. he’s okay now.
I think that some folks tend to pay less attention to their finances when times are tough, because it is just too depressing.. Unfortunately, this just makes matters worse as late payments and fines can quickly pile up..
This is great advice. I also agree with Jefferson above. When times are tough, I know I hated looking at my bank statement or credit card bill, because it was depressing.
Once the debt starts, it tends to snowball until the problem bursts. I think if you take small bites though, eventually increasing, you’ll be ok.
A very encouraging outlook. Definitely something to think about be for choosing one of these behaviors as a way to ignore the problem.
Great points. The key issue is realizing you have a problem and that change is needed. Getting out of from under the problem is not difficult, but it does require work and discipline to do so.
Change, yes. But, it also needs to be a positive and healthy process. I focused on several unhealthy responses.
Great advice as usual. One place I always emphasize is looking at needs vs. wants. When you say “Spending More When You Ought to Spend Less,” it is important to look at exactly what you are spending and where it is going. It is not just about spending less, it is about spending less strategically and focusing on the big wins.
I was thinking more about the psychology of avoiding reality by spending more. However, you are definitely right. Cutting spending is not a blunt instrument. There needs to be a focus and purpose. It’s about changing financially, not just changing spending.