The Top 8 Financial Problems Affecting People Right Now & What to Do About it

By Myles Leva

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Last Updated: July 14, 2022

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What are the financial problems that affect most people today?

Fortunately, Bankrate conducted a study asking almost this exact question. The study delved into the relationship people manage between their finances and their mental health. Specifically, respondents gave answers on a list of issues that “cause a negative impact on [their] mental health.”

The results are interesting but mostly unsurprising. In this article, we will go over the financial difficulties that concern the most people. We will then go over how each of these financial problems can be mitigated or tackled.

 

 

People are Struggling With These 8 Financial Problems 

1. Insufficient savings - 57%

Insufficient emergency savings came in as the most widely experienced financial difficulty that people have.

The fear of being unprepared for an emergency is widespread, and this problem has been well-known for some time now. We’ve covered the issue of emergency savings here before.

In addition, we’ve often cited the infamous Fed poll that revealed how 40% of Americans don’t have $400 saved for an emergency. This figure has been fairly consistent since 2017.

Emergency savings is a critical area of finance that should typically be handled before moving on to long-term investments or other financial goals.

But the reality is that many people are living paycheck to paycheck due to high costs of living, bad budgeting, or both. When a serious emergency strikes, you don’t want to incur the fees associated with early withdrawals from retirement accounts or end up selling a car or a house.

As with many financial challenges, the only remedy is budgeting. Building an emergency fund requires stricter budgeting until you’ve saved up enough to cease working for at least 3 months.

 

2. Unable to afford everyday expenses - 56%

If you’re having trouble keeping up with your bills and regular, necessary expenses, you are in good company.

The majority of Americans share this challenge with you.

Being unable to afford everyday expenses puts you in a dangerous situation. You run the risk of entering a debt spiral or needing to pawn/sell your belongings just to make it by.

There are a few ways you can try to get your finances back in order. One extreme option would be personal zero-based budgeting. You can and should also take advantage of other budgeting strategies to reduce your spending as well. The US Government would recommend that you:

  • Contact your lenders and any other creditors
  • Cease withdrawing from your accounts whenever it’s not necessary
  • Regain control over your budget

 

3. Being in debt - 48%

This situation that affects almost half of Americans is similar in nature to simply being unable to afford everyday expenses.

However, it’s a more serious and developed version of the same problem. Too much debt also becomes dangerous, stretching your budget and causing your overall financial situation to deteriorate.

There are some resources from non-profits that you can take advantage of, such as free consultation. However, you can always start with some personal steps, such as a new debt reduction plan.

 

4. Not enough discretionary spending – 46%

“Discretionary spending” refers to money that you can spend at your own discretion.

It’s your “entertainment money”, and you can spend it whenever and on whatever you like.

This problem is just one step above not being able to afford everyday expenses. Some people can afford what they need, but don’t seem to have anything left over to spend on what they want, but don’t need. That means no costly hobbies, no vacations, no nights out, and no guilty pleasures.

Again, the only remedy to this problem is a serious change to your budget. Either your income must rise or your expenses in other areas must drop.

Because this isn’t your top financial priority, that can be hard. Sometimes, downsizing may be the solution. Moving to a less expensive apartment, for example, may free up some money that you can then spend frivolously, so you can live a little and not just be scraping by.

 

5. Being unprepared for retirement - 39%

Many people are unprepared for retirement.

With the costs of basic living going up so fast, it’s understandable that 39% of Americans may not be able to prioritize long-term savings.

Most of the remedies for this problem are the same as the remedies for other personal financial challenges. Read our article on the topic here.

 

6. Paying for housing - 38%

Property values are at an all-time high and have been rising especially quickly during the last few years.

At the same time, rent prices have risen similarly. Overall, housing now takes up a much larger portion of peoples’ personal budgets.

This isn’t a problem that can be easily avoided. Renters can perhaps downgrade their lifestyles and move to a cheaper rental. Homeowners can similarly sell their current houses and use the proceeds to buy a cheaper one, using the difference for other expenses. There are also FHA loans for homeowners.

 

7. Not having a stable income - 33%

About one-third of Americans report challenges that arise from having an unstable income.

The “gig economy” encompasses a larger share of US workers than in the past. Likewise, many jobs are seasonal, or perhaps hours worked will shift season by season.

If this general situation describes you, read our article on budgeting while living on an unstable income.

 

8. Investments - 17%

Well, we’ve gone through every major financial problem that over 1 in 5 Americans suffers with.

With all of those problems bogging so many people down, it’s likely no surprise that 17% cannot set aside enough money for their investments.

Not investing is not the most serious financial commitment to forgo, at least in the short term while you’re young. But failing to invest long-term can jeopardize your retirement comfort and your overall quality of life in the future.

 

 

Conclusions

These are the financial problems that most people reported having when taking the Bankrate survey.

As you can see, most of them follow a logical progression. Basic personal financial management can fall apart and get progressively worse. However, there are almost always changes you can make to make your situation at least slightly better.

Photo by Karolina Grabowska

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