Do you feel stressed about money? Do you feel like your finances are so out of control you don’t even know where to start improving them?
I have some good news for you: the root of your financial problems may not be as complicated as you might think.
After helping thousands of women transform their finances, I’ve noticed six major roots of money problems. Today, I’m going to help you get to the root of your financial problems and give you tips on how to fix them.
What’s causing your financial problems:
Root problem #1: Not having a plan
Do you feel like you’re not making any financial progress? Every year, your net wealth is holding steady, not really going up or maybe going down? Or are you constantly surprised by how little money is in your account at the end of every month?
If so, your problem is likely that you don’t have a plan for your money.
There are at least two plans everyone should have: a spending plan and an investing plan.
Your spending plan is your blueprint for how much you plan to spend each month. Ideally, you want to be saving at least 20% of your income each month. If saving money each month is something you struggle with, then stay tuned, because I will be talking about that in a minute.
Your investing plan is your strategy for growing your money. This can include saving money for retirement in tax-advantaged accounts and building your investment portfolio by investing in the stock market, bonds, real estate, etc.
Now, those are the minimum. But depending on your individual financial situation and goals, you may want to develop more money plans than that.
For instance, if you have credit card debt, you need a plan to pay that off. If you want to travel more but can’t afford the vacation you dream of, maybe you’ll start a travel plan.
Developing a money plan is like mapping out a road trip; it’s going to help you reach your financial destination faster and with much less stress.
Root problem #2: Unprepared for surprises
An unexpected expense comes up and sends you into a financial (and probably emotional) spiral? Like, your car broke down and you didn’t have the funds to repair it? Or you got laid off and had no idea how you would pay your bills?
If that resonates with you, your problem may be that you’re unprepared for surprises.
Sometimes, life happens. Appliances break down, medical emergencies arise, the company goes through lay-offs…
Obviously, you can’t be prepared for every possible situation that can pop up, but it is important to have an emergency fund, ideally with 3-6 months worth of expenses in it, so that every emergency isn’t causing a financial crisis.
Root problem #3: Unhealthy relationship with money
Does thinking about money stress you out? Do you avoid credit card and bank statements? Do you know how much money is coming in and going out of your account each month?
The root of this problem is likely an unhealthy relationship with money.
When finances stir up negative feelings, you’re more likely to avoid them altogether instead of handling your problems head-on. This causes your problems to get worse, which makes you feel worse, which means your problems get worse…and before you know it, you’re caught in a vicious cycle.
Unfortunately, there’s no quick fix to this problem. You need to start reprogramming your mind to see money in a more positive light.
One way to do this is to replace lower level money thoughts with higher level thoughts. For instance, when you find yourself thinking, “I’m bad with money,” instead tell yourself, “I’m learning how to make better money decisions every day.” Or instead of, “I’ll never pay off my debt,” say, “I’m making progress toward my financial goals with each payment.”
And in the same way you improve a relationship with a person by spending time with them, you can do the same thing with your finances. Set aside an hour each week to spend time with your money. We call this a weekly money ritual.
Root problem #4: Not having enough money
Do you struggle to pay your bills every month? Do you constantly worry about not having enough money? Do you feel like your finances are holding you back from your dream life instead of allowing you to live it?
If so, you have a really common financial problem: not having enough money to cover your expenses or meet your financial goals.
If that’s the case, then you have two options: decrease your expenses and/or increase your income.
If you choose to decrease your expenses, take some time to evaluate your spending habits and pinpoint exactly where your money is going.
You might not be spending money recklessly; likely, the majority of your spending is on necessities like housing and groceries. But are there other ways you can cut down on those expenses, at least temporarily?
It’s easy for expenses to creep in or for you to not be aware of how much you’re actually spending. That’s why it’s important to review your credit card and bank statements regularly in your weekly money ritual.
If you can’t decrease your expenses, then you may choose to try to increase your income.
The easiest way to do this is by asking for a raise or increasing your rates if you’re self-employed. If it’s been a while since you got a pay bump, it may be time to talk to your boss.
Beyond that, it may be time to get creative. You may need to start thinking about side hustle ideas.
Root problem #5: Lack of education
Are you just confused about your financial situation? Are you unsure how to invest or pay off debt? Do you not know how well you’re saving for retirement?
If so, your problem might be a lack of financial education.
Unfortunately, this is an extremely common problem, especially for women. Most of us weren’t raised with the expectation that we would have to manage money someday. Women frequently trail behind men in financial literacy, contributing to lower levels of financial success.
You need a certain threshold of financial knowledge in order to make smart financial decisions and achieve your money goals.
The good news is that this problem is easier to fix than a lot of the other problems I've mentioned.
In fact, by reading this article, you’re already improving your financial education, so give yourself a pat on the back! Challenge yourself to keep up the momentum! Our blog and YouTube channel both provide a wealth of free financial education.
If you’re committed to improving your financial knowledge, you can also join one of our financial education programs!
Million Dollar Year is a great program if you’re just starting out on your financial journey. In it, we’ll help you build a foundation of financial wellness. We start by transforming your money mindset, then through bite sized steps, we teach you how to create a budget, pay off debt, invest for the future, and so much more. In fact, in the Million Dollar Year, we have tools to address every root problem that I’ve talked about.
Here’s a little hint: if you watch our free masterclass, we’ll give you a special discount!
Root problem #6: Family complications
Do you and your partner have two very different ideas on how to manage money? Do you have a relative who’s always asking you for cash? Or maybe you want to pay for your kids’ college education but can’t afford to?
If so, family complications may be making your financial situation more difficult.
It may be time to sit down with your significant other and have a heart-to-heart about money management and your financial future. It might make things easier if the two of you are on the same page.
If a relative is getting in the way of your financial success, it’s time to be honest with yourself about how you can realistically help them. It’s like when the flight attendant tells you to secure your own oxygen mask before helping someone else; you can’t help someone with their finances if you’re sabotaging your own success to do it. It won’t be a sustainable or healthy solution for anyone.
I know that this is a tricky situation, but don’t be afraid to have some tough money conversations with your loved ones, draw boundaries, and explain that you need to prioritize yourself in order to reach your financial goals.
Ready to solve your financial problems?
Knowing the root causes of your financial problems can help you fix and avoid them in the future. It’s like going to therapy for your money and finding out what’s really underneath your struggles so that you can start tackling the right thing and take the first step towards changing your financial future for the better.
And remember, if you struggled with root cause #5, or really - any of the above - we have a ton of great resources to support you on your journey and I’d highly recommend starting with our free masterclass.
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