Nobody wants financial problems. Unfortunately, however, circumstances out of our control, such as job loss, are what cause financial problems. For many people, this is a serious concern that is more than financial hardships.
Think about this statistic from the United States Census Bureau for a minute when it comes to what causes financial problems: one in eight Americans lived below the poverty line in 2018, which is actually an improvement. In total, this equates to more than 38 million people earning $25,465 for a family of two adults and two children, while the median household income was at $63,179.
Why does this matter? Consider your daily costs. Now weigh the struggles when you have little in savings and experience financial hardship derived from a medical expense or are trying to pay for college—two of the biggest debt-creating problems, according to the Census Bureau’s annual poverty report.
As a family or an individual, slight changes in your economic situation can lead to what causes financial problems that have a lasting impact.
Read on for more information about what causes of financial problems and how to prepare before tough times arise.
The High Price of Education Causes Financial Problems
The average cost of a college education in the U.S. ranged from $10,100 for public in-state to $36,800 for a private institution in 2019. Some higher-learning institutions can fetch more than $50,000 per year. As a result, families and students have accumulated tens of thousands of dollars in debt, $1.4 trillion countrywide to be exact.
The average student loan debt is approximately $35,400. By the time these learners graduate, they are already experiencing one of the biggest money issues that are part of what causes financial problems—and will likely work to pay off that debt for more than a decade, at best.
The Impact of Healthcare Causes Financial Problems
The depth of medical debt is serious and astonishing. A Kaiser Family Foundation report found that 26 percent of Americans said they had a problem paying medical bills. The impact goes beyond what causes financial problems because some of these individuals have to make choices about paying their medical bills versus buying food or delaying health treatments.
There are almost 43 million Americans with some level of medical debt. The worst-case scenarios result in millions declaring bankruptcy. Part of the problem was that they had to leave or work fewer hours to take care of a loved one.
Other Situations That Causes Financial Problems
Beyond healthcare and academia, there are other reasons for financial problems in the United States. Some of these include:
- Retirement planning
- Tax planning
Real estate and the stock markets can provide high returns on investments. Wealth diversification is sound financial planning method. However, there is also a great risk, which can drain your bank account because of not being prepared to fail.
Lack of Retirement Planning
This is more about not planning for your future. At some point, you will stop working and will likely need extra income. It’s never too late to start planning for your days post-employment to mitigate the causes of financial problems while living on a fixed income.
Too Much Debt
Bills mounting from education and medical expenses certainly add to your debt. Falling behind on credit card, mortgage, and auto loan payments are also a problem. Debt growth has led to economic problems largely fueled by our consumerism and once you fall far behind it becomes difficult to get out of the hole.
Wealth Management and Tax Planning
There are tax advantages for owning a business. Financial experts can help you develop a plan to avoid your retirement or investment portfolios from being swallowed up by taxes by finding ways to reduce your liabilities.
Avoiding What Causes Financial Problems
There is no magic solution, but there are methods you can implement to avoid what causes financial problems. One simple tip is to create and follow a budget so you are not spending beyond your means.
Green Ridge Wealth Planning will work with you to address your immediate needs but also prepare you for future expenses. Contact us today.