How to Overcome Financial Problems

by John Csiszar ; Updated July 27, 2017
Digging yourself out of a financial hole is often harder than avoiding the problem in the first place.

Successful financial management amounts to a balance between income and expenses. If you find yourself in financial straits, looking at both sides of the equation can help you determine the best course of action to overcome your problems. As with most problems, the earlier you can identify any difficulties, the easier they will be to solve. Understanding what to look for can help you identify early warning signs so you can take action.

Step 1

Track your money. It can be nearly impossible to solve a financial problem unless you understand where it originates. Keep detailed records of your income and expenses so you can identify the source of the problem.

Step 2

Compare your expenses to established norms. Numerous publications outline suggested budget amounts across typical household categories. For example, the U.S. Department of Housing and Urban Development considers a housing expense of more than 30 percent of income as "cost burdened." While your financial situation may be unique, once you start tracking your money, it should be easy to see where you are spending more money than your income allows.

Step 3

Eliminate excess expenses. Overcoming financial problems typically involves tightening your belt and making certain sacrifices. Although you may want to spend half your income on entertainment, for example, you won't be able to overcome your financial problems if you don't live within your means.

Step 4

Attack your debt. If you're having trouble managing your finances, you may have taken on debt to help you get by. One of the main problems with debt is that you have to pay back the money you originally borrowed plus interest. If you've relied on credit cards, you may be facing interest rates of 15 to 20 percent or more. Trying to work your way out of a financial problem while facing those types of interest rates is like running uphill. If you don't have any savings to eliminate your debt, try to find a zero percent balance transfer offer to at least reduce your interest expense while you dig your way out of your financial hole. Just be aware that some balance transfer offers incur fees that negate their beneficial effect.

Step 5

Generate additional income. It can be hard to conquer financial difficulties by focusing exclusively on expenses. Taking on extra work or selling unneeded possessions are two ways to help the income side of the equation. If appropriate, don't be afraid to ask your employer for a raise.

Step 6

Stick to your budget. Once you've managed to balance your income and expenses, you'll have to keep your finances in line going forward or you'll end up in the same situation. Some unpleasant cuts to your expenses may need to be permanent unless you can raise your income. Your budget can and should be adjusted as your life circumstances dictate. For example, if you start earning more money, you may be able to safely restore some of your original expense cuts. Staying within the parameters of your budget can help you avoid future financial problems.

About the Author

John Csiszar earned a Certified Financial Planner designation and served for 18 years as an investment counselor before becoming a writing and editing contractor for various private clients. In addition to writing thousands of articles for various online publications, he has published five educational books for young adults.

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