At some point in our lives, most of us will experience money problems.  For some, these problems may be minor and short-lived.  For others, these problems may be severe and last a lifetime.  Money issues can cause health problems and marriages to fail.  So, it’s not something to be taken lightly.

The good news is that money problems can often be overcome.  Even the worst financial conditions can be turned-around or at least improved.  There are simple steps to mitigate money problems and turn the corner towards prosperity.

Step 1 – Face the Problem

I read a sad story in Yahoo Finance about a woman with $555,000 in student loan debt.  Her loan balance was around $250,000 when she graduated from medical school in 2003.  But, she deferred her loans and then defaulted.  So, the interest and penalties more than doubled the outstanding loan balance.

This illustrates an important aspect of personal finance and life in general.  Ignoring a problem almost always makes it worse.  You can’t make money problems go away by ignoring them.  You have to face them head on.  Even if this is unpleasant for you.

Step 2 – Identify the Cause

Every situation is different.  But, here are four main causes of money problems:

• Too little income to support yourself
• Too high of expenses for your income
• Lack of spending or budgeting discipline
• Debt interest undermines your finances

If you don’t know which of these items is the cause of your money problems, I would start by looking at your budgeting and spending discipline.  I don’t live on a strict budget myself, but I do know where my money goes.  And, I have dealt with all of the above circumstances.  So, I understand exactly how frustrating each can be.

Income – Living on a poverty level income is something I don’t recommend for anyone.  In fact, I consider it to be the single biggest mistake I have made.  Income can be increased, but it’s not easy and it can’t be done quickly.  First, try to improve your wages at your current job.  If that doesn’t work, look for a better paying job.  The best long-term solution is to increase the amount of money you earn per hour.  If that can’t be done, pick up a second job or start a side-hustle.  For the short-term, this is often the easiest solution.

Check Out: Practical Advice for the Career Challenged

Expenses – Reducing your expenses may be the easiest way to improve your finances in the short-term.  And, you have a lot of control over discretionary expenses.  The big problems come from big fixed costs, such as mortgages and car payments.  These costs can’t be easily reduced and they can haunt your finances for years.  Avoiding the new car treadmill and too much house pitfall are two of the best things you can do for your finances.

Check Out: Living Large on what you Earn

Discipline – If you can’t say off the top of your head where 90% of your money goes, you probably lack spending and budgeting discipline.  This is crucial, because you may be squandering the money you need to be saving.  Otherwise, you will never get ahead.  Whatever budgeting method you use, you need to get a handle on your spending and plug those money leaks.

Check Out: Why I Never Budget

Debt – The problem with debt is the interest, which depletes your finances.  And, the worse you are in debt, the more vicious the fees and interest become.  It can seem nearly impossible to climb out of debt, because it keeps piling on faster than you can pay it off.  Take heart and check out the plan below.  It is a sure-fire way to help pay off debt.

Check Out: The 10-20-70 Plan for Paying Off Debt

Step 3 – Formulate a Plan

Most people don’t want to look at the reasons why they are having financial problems.  It’s something they would rather avoid.  But, having a plan is very empowering.  It gives you the courage to face these problems and the enthusiasm to overcome them.  Without a plan, you will continue to fail.

When formulating your plan, make sure you put everything on the table.  Look objectively at the reasons you are in trouble and the costs associated with each item.  Don’t give any of your indulgences a free-pass.  I know someone who may lose their house to foreclosure, but is unwilling to get rid of one car payment.  And, they have two new cars.  In order to make changes to your finances, you will have to make changes to your lifestyle.

Check out: Four-Step Debt Evaluation Plan

Step 4 – Implement your Plan

Planning is worthless without action.  And, action is worthless without commitment.  If you haven’t formulated a solid plan and aren’t committed to its success, you won’t be successful.  You will either fail to make the decisions that are necessary or sabotage your efforts and blame circumstances.

You also need to implement your plan in a way that is sustainable until completion.  If your plan is too strict and doesn’t allow for any fun or entertainment, you may give up.  There will be setbacks during your journey and you should plan for this now.  Prepare yourself for small disappointments and keep your momentum going for the long-haul.

The Bottom Line

The bottom line is that small changes can add up to big results over the course of a lifetime.  The habits you chose to cultivate now may make the difference in the future you create for yourself.  Think of pleasant times ahead and then go out and make it happen.  Here’s to a life free of stress and money worries.

“Empty pockets never held anyone back.  Only empty heads and empty hearts can do that.”

Norman Vincent Peale – Preacher, Author & Motivator

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This post was featured on the Carnival of Money Hacks. This is my second time submitting to the Carnival of Money Hacks and I am honored to be posted among such a talented group of bloggers

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