Personal financial distress: Causes
Beginning our focus this month on how to deal with difficult personal financial economic times. Personal financial distress in a nut shell happens when expenses exceed income. Some of the factors that cause personal financial distress include;
- The loss of a job. Most people make an income from a job, when one loses ones job then inevitably financial distress can occur more so if one had no savings or emergency fund to cushion one during hard times.
- Reduced income. This may happen if one undergoes a pay cut or say if ones business hits a bottle neck and is not generating as much revenue as it used to in the past and yet the expenses remain the same.
- Poor money management skills possibly due to no formal education on money. A negative attitude towards financial health. Living beyond ones means comes to mind. In this day and age where consumerism and “show it offism” is the order of the day one may be tempted to put up appearances, making purchases beyond ones income stream instead of living within ones budget.
- Little or no savings to fall back on during hard economic times. Savings is money set aside for anticipated future consumption. People forego current spending so as to plan for future events e.g. children’s education, schooling. Savings are extremely important to cushion one during challenging times e.g. loss of a job, sickness expenses beyond which insurance may not cover.
- Overwhelming debt. This is closely related to poor management skills where people borrow more than they can adequately pay off and worse still borrow for consumption purposes as opposed to for investment purposes.
- Divorce, separation or death of a spouse. One of the main reasons people get married or have partners is for financial strength. Two heads are always better than one. Sadly, money matters are also the greatest cause of marital breakdown, when the two partners cannot agree on income, expenditure and investment purposes. Divorce, separation and death are leading causes of financial distress with many bearing a bigger financial burden especially if the former spouse was chipping in the upkeep of the family.
- Illness and medical expenses incurred. This is especially difficult if one has no medical insurance and even then sometimes medical expenses go beyond insurance limits. This is a cause of great personal financial distress.
- Catastrophes that cause loss of personal wealth e.g. fire, floods, theft.
- Alcoholism and Drug addiction.
Many alcoholics and drug addicts find it very difficult to sustain a job or income generating venture. Even for the few who do, the income that is generated goes to maintaining the alcoholism and drug addiction.
Can you think of other factors that cause personal financial distress?
Next , we will dive right into how to deal with difficult personal financial times.
May 2018 – Soaring in building my personal brand – a focus on personal financial management during personal financial distress, etiquette and grooming.