1: Monthly spending exceeds income.
Many consumers struggle with the basic challenge of having an income that doesn't cover their expenses. The first step to overcome this obstacle is to set a monthly budget that categorizes expenses to rein in excessive spending. But depending on the gap between your monthly income and your financial costs, you may need to consider getting a second job, requesting to work overtime, or seeing if your employer can give you a raise.1
2: You can't get out from under car payments.
Car payments can eat up spare income every month, and if you've recently upgraded your vehicle, you might feel like you're always making car payments but never paying your vehicles off. By changing the way you approach car purchases, you could reduce your losses and minimize the cost of car payments.
"One way to reduce car payment debt is to buy used cars, which come at a lower price and depreciate slower than new vehicles," says Shelli Schroeder, Chief Operations Officer for Oklahoma Central Credit Union. "Then when you go to trade in that car, you'll have greater trade-in value and your new car payment will be smaller as a result."
3: You carry a credit card balance every month.
Credit cards charge high interest fees on any balance carried over from one month to the next. As you re-evaluate your budget and work to reduce expenses, make sure your income is also able to pay off credit card balances every month, saving yourself from fees that push you further into debt.
4: You don't have an emergency fund.
Life events like a loss of income, car breakdown, hospital visit or other unforeseen event can put consumers into a hole if they don't have an emergency fund at their disposal. Even a fund of $1,000 can save you from having to take on credit card interest or open a personal loan. Dedicate part of your monthly budget to save for this emergency fund. Even contributions of $50 a month can add up quickly, creating a buffer that will come in handy when a rainy day hits.
5. Your rent keeps going up.
Rising rents across America are pinching consumer budgets, and many consumers find themselves wondering if it makes more sense to buy instead of rent. While there are a number of things to consider, including your household income and your willingness to stay in a purchased home for at least five years, it's worth looking at a rent vs. buy calculator or talking to a financial advisor to determine whether buying can save you money and start building equity in a real estate property.
6. A new baby brings unexpected costs.
Children are expensive. Everyday items like diapers, formula and baby food can stress monthly budgets and checking accounts even before new parents face the cost of daycare and other unavoidable expenses. If possible, plan ahead and start saving for these expenses before they hit. Even if you do manage to put away some baby-specific savings, you may still need to look at your budget and create space in your monthly spending to accommodate these new demands.
7. You owe the hospital for medical care.
Medical bills can be a significant financial burden, especially if you're someone who doesn't have insurance, or you do, but it’s a high-deductible plan. But hospitals are used to dealing with patients who can't afford to pay their bills in full, so take advantage of your options to reduce the cost and spread it out over time.
Some hospitals, for example, are willing to reduce the amount owed in order to get payment. And many are willing to talk about a payment plan that lets you slowly chip away at your bill over time. These options could help you pay off your debt in a manner that doesn't destroy your personal finances.
8. Your student loan debt limits your financial capabilities.
Large student loan debts can demand payments that limit your ability to buy a home or increase your savings. But delaying the payment of these debts only results in paying more interest over time. Consider taking whatever approach to debt reduction that helps you meet your goals: Borrowers have the option of refinancing at a lower rate to reduce the amount owed, or they could increase their monthly payments to pay off debt faster. Either approach could alleviate your student loan burden while creating opportunities to rebuild your finances.2
9. You aren't saving enough for retirement.
Many U.S. consumers are worried they aren't saving enough for retirement. But it's never too late to start trying to catch up. If you aren't maximizing contributions to a 401k, put as much tax-deferred money as possible into these accounts, and be sure to maximize matching.
"If you're able to put money into additional funds, consider opening an extra IRA to build that retirement fund and secure your future," says Brad Scheidt, Executive Vice President for Oklahoma Central Credit Union. "Take advantage of these savings vehicles to lower your tax burden and earn interest for your golden years."
10. You feel overwhelmed by financial matters.
Personal finance is a complex subject, but it has implications that will affect you the rest of your life. If you're feeling overwhelmed or confused by your own financial situation, it's worth the time and money to take a financial literacy class. Your local credit union may have additional educational resources to help you better understand your finances and what you can do to overcome financial challenges.
Financial challenges may sometimes seem insurmountable, but there's always a way to address these obstacles and build a better financial future. It may not happen overnight, but with patience and persistence, you can take steps to strengthen your financial outlook and put these challenges in your rear-view mirror.