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Many people are suffering from financial suffocation. Financial suffocation is being overtaken and trapped by financial commitments, unforeseen expenses, and the inability to meet recurrent costs as and when they arise. Such financial strains could lead to being trapped in a cycle of debt that may seem impossible to break, leading to anxiety, stress, and depression. This article will examine some of the most prevalent causes of financial suffocation.
Lack of financial know-how could be the primary cause of economic suffocation. Knowledge of how to manage and budget for income, save for a rainy day, and when and how much to borrow, among others is key. You can continually educate yourself through workshops, seminars, the internet, and reading books and blogs on financial matters. You can also set up a financial automation system for your finances to help prevent missed payments and save money without having to think about it. Finally, seek professional help, like hiring a financial planner or advisor to develop a financial plan that fits your goals and needs. Doing so will give you control over your finances and avoid suffocating in debt.
It can be challenging to meet your basic requirements when you spend more money than you make. Overspending can result in a debt cycle, where you keep taking loans to get by. It’s crucial to recognize your spending habits and take action to control them. Lifestyle inflation is another major problem, especially when your income increases. Take the example of getting a pay raise or a job upgrade at your place of work. It would be tempting to upgrade your lifestyle and increase your spending. Do not fall into that temptation. Instead, save that extra income for your future financial goals. This will draw you closer to financial stability.
When hit with an unexpected bill or obligation, knowing how to change your budget to locate funds to pay off the emergency can be challenging. To deal with such scenarios, building emergency funds like our Future Savings Account is highly recommended, which can help you cover unexpected expenses. Additionally, you can look for an alternative sources of income. Finally, as mentioned in our previous article, consider taking on freelance work, crafting, and digital creativity to earn extra cash and help you cover unexpected costs.
We have done an article on bad and good loans. A loan is termed as bad when it is taken for consumption other than investment, costs are too high than the anticipated rate of return from investment, or when credit is taken without a clear purpose. Debt repayment difficulties may prevent you from being able to invest, save money, or make future investment plans. Increased costs on credit will lead to over-commitment and, in worse cases, lead to loan default, resulting in massive penalties. This affects your credit score adversely, barring you from accessing credit from reputable Financial Institutions in the future. One way to manage this is by prioritizing paying off high-interest debt as soon as possible; this could even involve loan buy-off by a cheaper Financial Institution.
Financial suffocation is a genuine problem that many individuals encounter today. Having too much debt can be draining and cause anxiety. In addition, financial suffocation causes a strain on relationships, health, job performance, and one’s overall well-being. Having a financial advisor and following the above tips will help you take charge of your finances, secure a bright future, and generally bring your live closer to financial stability and freedom.
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