How to get financially unstuck
A financial rut is a situation where you experience ongoing financial difficulties and struggle to keep up with your financial obligations. It can be caused by a variety of factors, including low income, high debt, unexpected expenses or poor financial management.
The longer someone remains in a financial rut, the harder it can be to get out of it, but breaking out of a financial rut requires taking proactive steps to regain control of your finances.
Here are 5 signs that you are in a financial rut and what you can do to get out of it:
You live paycheck to paycheck
Living paycheck to paycheck means relying solely on your salary to cover basic costs such as rent, bills and groceries, with little to no room for saving or unexpected expenses.
This financial instability can lead to a constant cycle of stress and anxiety as individuals struggle to make ends meet and worry about what might happen if they encounter a financial emergency. It can also hinder long-term financial goals such as saving for retirement or buying a house. While it’s a common situation for many, it’s essential to take steps towards better financial stability and security.
How to break the paycheck to paycheck cycle
This involves a combination of budgeting, saving and potentially increasing your income. By creating a budget to track your expenses, you can identify areas where you can cut back. Building an emergency fund is also crucial to cover unexpected expenses and prevent reliance on credit. Additionally, considering ways to increase your income also helps provide financial stability.
You tend to overspend on your budget
This occurs when you constantly spend more money than you earn and often stems from impulse buying, emotional spending or a lack of financial awareness.
When you spend more than what you should or more than what you have, it jeopardises your current and future financial stability by increasing debt that will take you longer to pay off and, therefore, hinder your ability to save for and reach your future goals.
Learning to recognise and curb overspending habits is crucial for maintaining a healthy financial life and achieving long-term financial security.
How to curb overspending
Becoming financially and behaviourally aware is essential for those prone to overspending. It involves understanding not only your financial habits but also the underlying emotions and triggers that lead to overspending. By developing this awareness, you can identify patterns of behaviour, recognise when you are at risk of overspending and seek support from financial advisors or counsellors.
Ultimately, becoming financially and behaviourally aware empowers you to take control of your finances, break free from overspending and work towards your long-term financial goals.
You find it hard to save money
Not being able to save money each month can have a significant impact on both your short- and long-term financial goals. Without savings, you may struggle to cover unexpected expenses such as car repairs or medical bills, leading to financial stress and added debt. It can also leave you vulnerable to financial emergencies or job loss without a safety net to fall back on.
How to start saving
Starting to save money each month may seem challenging, but it is achievable with careful planning and discipline. By creating a budget to track your income and expenses, identifying areas where you can cut back or eliminating unnecessary spending, realistic savings goals are possible. Consider starting with a small amount that you can afford to save regularly. As you gain confidence and your financial situation improves, you’ll be able to build a financial cushion, reduce financial stress and work towards achieving your long-term goals.
Your salary doesn’t cut it
Even if you're financially responsible and budget-savvy, a low income can still lead to a financial rut. Limited income makes it tough to cover basic expenses, let alone save for emergencies or future goals.
Asking for a pay raise can be a proactive step in breaking free from a difficult financial situation. By negotiating a higher salary, you can increase your income and improve your financial stability. A pay raise can also provide you with additional funds to cover expenses, build savings and work towards your financial goals.
How to ask for a salary increase
- Know the industry benchmark: visit comparison sites to see what people in your industry are making. This will help you determine whether you are being underpaid.
- Build your case: prepare a list of your accomplishments and contributions, particularly those that can be quantified.
- Be open to negotiation: negotiation is often about finding a middle ground. Be ready to make concessions while ensuring that your basic salary needs are met.
You’re struggling to move forward
It’s natural to make mistakes; everybody does. However, failing to learn from your financial mistakes can result in repeated patterns of overspending, debt accumulation or poor investment decisions, hindering your progress towards financial stability. By understanding and acknowledging these mistakes, you can make informed decisions, develop healthier financial habits and break free from the cycle of financial hardship.
How to learn from your financial mistakes
Educating yourself about finance topics and seeking professional advice when needed is crucial in developing healthy financial habits. Regularly reviewing your finances and avoiding impulse purchases can help you take a proactive step in making informed decisions to improve your financial well-being.
Disclaimer: This article is solely intended for information. It does not constitute financial, tax or investment advice or recommendation. Please speak to a financial advisor or registered financial professional before making any financial decision(s).
Standard Bank, its subsidiaries or holding company, or any subsidiary of the holding company and all of its subsidiaries make no warranties or representations (implied or otherwise) as to the accuracy, completeness or fitness for purpose of the information provided in this article or that it is free from errors or omissions.
Related articles and media
