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7 Sources of Financial Problems & Difficulties – And how to deal with them

Financial problems and challenges happen to almost everyone at some point, and the stress and worry can be all but overwhelming. However, realizing that there is usually a way out can assist you in addressing the problem. You may be able to find the way out yourself, or you may need someone else's perspective to help you find a solution. Below, we provide you with ideas on how to overcome financial problems. However, one size does not fit all. If your situation is beyond the general help provided here, you may find that your banker at The Peoples Savings Bank will be able to help you sort through your options.

  1. Identify the Underlying Problem That's Causing the Difficulties

  3. Create a Budget - Spend Money in a Way That Helps Solve the Problem
  4. Determine Financial Priorities to Guide Your Spending Choices
  5. Identify Small Steps You Can Take to Address the Problem & Achieve Your Goals
  6. Develop Your Plan to Overcome Financial Problems for Good
  7. Review How Things are Going
  8. Preventing Future Challenges

  1. Identify the Underlying Problem That's Causing the Difficulties

  2. The first step to overcoming financial problems is to identify the underlying issue that’s causing those financial difficulties. Financial problems are usually a symptom of a bigger issue. To come up with solutions that work in the long run, take the time to identify the real source of your financial troubles.

    The concept of identifying a specific problem is important because it is more likely to result in a lasting solution. Just like with a leaky faucet; placing a bucket below it is temporary. Fix the tap and the leak will stop. Focus on solving the problem that’s causing your money troubles -- rather than dwelling on your stress.

  3. Create a Budget - Spend Money in a Way That Helps Solve the Problem 

  4. One of the best weapons for combating financial problems is a budget. A budget is a monthly spending plan for your money. Creating a budget is like turning the lights on to find your way around in a dark room. Instead, with the lights on, you can see what’s going on and prevent problems before they actually happen. A budget works much the same way -- it guides your spending decisions so that you're spending money on what's really important to you. In this case, you'll spend your money in a way that helps solve your financial problem. You can use our handy budgeting tool to help you build your budget.

    Track Your Expenses to Build a Budget That Works

    As you create your budget, it’s important that your expenses aren’t just guesses – they need to reflect reality. You may want to track your expenses for at least a couple of weeks (a month is best) to objectively see where you are spending your money and how much you’re spending. Although you may think you know where your money is going, when most people tally up all their purchases for a month, they are usually quite surprised to notice that their spending doesn’t always match up with their priorities.

    Once you’re confident the numbers in your budget are realistic, you can look at your spending critically and search for areas where you can save money. You’ll want to ask yourself things like: Do I need to eat out this much? Do I need to spend on entertainment or hobbies this month? Could I pack a lunch for work rather than buy one?” Asking yourself these questions doesn’t mean you’re cheap or restricted by your budget. It means that you’ve got bigger things to accomplish or worry about, things that can be solved by making some small changes. 

  5. Determine Financial Priorities to Guide Your Spending Choices

  6. To overcome financial problems and solve your difficulties for good, you need to determine what your priorities are. Some might be clear-cut financial priorities, e.g. to pay off your credit cards. Others might be lifestyle-goals, based on your values, e.g. save up for house repairs, or a Disney vacation, or a pool in your backyard.


    Setting clear priorities for yourself makes it easier to make tough financial decisions. Turning priorities (what’s important to you) into actionable and achievable goals (what you do with your money) will help you solve your money troubles and get back on track.


    Your first goal may be to create a budget to get to begin the process. For instance, one of your short-term goals may be to reduce your expenses and pay off your smallest credit card balance. A medium-term goal could be to pay off all your credit card debt or begin a savings account.

  7. Identify Small Steps You Can Take to Address the Problem & Achieve Your Goals

  8. The solution to financial problems is often to reduce expenses, increase income, or do some combination of both. This might not be something you want to do, and you’re not alone. Most people don’t want to make changes to their lifestyle -- but faced with the choice of ongoing money troubles, or making several small changes to ease the financial stress - most people are game to try. 

    Big changes are always much harder than small changes. To accomplish your goals, identify small steps you can take to achieve them. If you keep running into money problems because you’re $50 short every month, then maybe one of your first short term goals could be to pay off a small credit card balance that requires a $50 minimum payment each month. 

    Once you get the card paid off, you will have $50 extra to use in your budget every month. However, if by the time you reach this goal you’ve learned to get by without this $50, then use it to accelerate the payment of another debt each month, and get all of your debts paid off more quickly. 

    There is a name for this, it is called the “snowball effect” -- maintaining minimum payments on all debts -- but putting all extra money towards one debt to get it paid off faster. Once that one debt is paid off, you put all of those extra funds towards eliminating the next debt. It’s one powerful method of paying debts off faster.


    Look for Things You Can Do, Even Temporarily, to Improve Your Situation

    Here are more ideas or steps you can consider taking to improve your financial situation and alleviate difficulties:

    • As you look through your budget, ask yourself: Do I want this or do I need it? Will spending this money get me closer to my financial goals or further away? Can I live without it? 

    • Do you use credit cards for impulse purchases and not immediately pay those items off? This can contribute to a cycle of ongoing financial difficulties and add as much as 50% to everything you purchase. 

    • Ask yourself if you can downsize anything in your budget or switch to a less expensive option. If vehicle costs are straining your budget, can you downsize your vehicle or get rid of one vehicle (the average person spends over $9,000 per year to own and operate a vehicle). If your rent, mortgage, or home upkeep is bleeding you dry, can you downsize to something more affordable, rent out your basement, rent a room in your house or rent out the storage space in your garage?

    • If debt is the cause of your financial problems, there are a lot of ways to reduce or pay-off your debt.

    • Do you have any assets or “toys” you can sell to pay off your debt?

    • Can you take on a side job or create another source of income with something you know how to do well?

    • Look outside the box, ask yourself tough questions, invite a trusted friend to have a look at your budget and make suggestions, or sit down with your banker or a Credit Counselor and listen to their ideas.

    • Research viable options that will move you toward your goals. A consolidation loan, speaking with your Banker, a Credit Counsellor, or enrolling in a Debt Management Program may be other sources of assistance.

    • While doing any of these can be an unappealing thought, don’t just dismiss them because they’ll move you out of your comfort zone. Keep thinking about them…and give them some very serious consideration. Come back to these ideas from time to time to see if you can come up with a new angle on decreasing your expenses or increasing your income that might just work for you. Remember, you’re trying to get through a tough a time; you don’t need to do this forever, just long enough to get back on track.

  9. Develop Your Plan to Overcome Financial Problems for Good
  10. Once you’ve come up with some ideas for how to begin tackling your financial problems and difficulties, you can put together a realistic plan to accomplish your goals. Some goals will have a timeline of a few months; others will need a longer timeline, like 24 - 36 months. Write your goals down, but also write down where you’re at now in relation to each goal. For example, if one of your goals is to pay off a $4,000 debt, make sure to write down the current debt balance and your future goal of paying this down to $0. You’ll want to include in your plan the amount of money you’re going to pay on this debt every month so that you can pay it off within your desired time frame. Use our handy budgeting tool as the basis for assembling this information.

    If you’re really feeling overwhelmed and stressed by your situation, you can also reach out to a non-profit credit counselling agency for help. They have professionally trained Credit & Debt Counselors who can review your situation, help you put together a realistic budget, and help you come up with a plan to solve your current challenges and get your finances back on track. Their help is usually free and is always confidential.

  11. Review How Things are Going

  12. This last step takes place once you are a few months into working on your plan. Every once-in-a-while, take a few minutes to review how things are going. Is your plan working? Are you making progress toward your goals? If not, you’ll need to take a closer look to figure out why not and then make adjustments to your plan. Your plan needs to be realistic, or it’s not going to work. It should also contain some things you weren’t doing before you put the plan in place.

    If you keep doing what you were doing before, then you’ll continue to get the same result as before – problems. You’ve got to do something different to get a different outcome.

    As you follow your plan and see improvements in your situation, be open to the possibility of fine-tuning the plan. Once you start making some progress, you may find you’re doing better than you thought, or you may come up with some new insights. Improving your plan so that you accomplish your goals more quickly is good as long as your budget can afford the changes and everyone who relies on your budget is okay with the more aggressive approach.

  13. Preventing Future Financial Challenges

  14. Unexpected financial challenges are bound to arise in the future -- in fact, research shows that 6 in 10 people will experience major life events that will change their prior financial plans. The key to tackling these challenges is to be flexible. Review your budget frequently and make necessary changes. Build up a savings so that you can handle unanticipated expenses without going into debt and putting yourself back into a difficult situation.

    Overcoming financial problems and difficulties isn’t easy, but by setting some clear priorities for yourself, identifying ways to achieve these goals, and persevering with your plan, you can overcome the challenges and at the same time put an end to the financial stress.

    Source: MyMoneyCoach