The 5 Biggest Financial Problems Families Face (And Solutions)

Because life's complicated enough, let’s dive into smarter and flexible solutions to 5 of the most popular financial challenges families face.

“The good news is that regardless of your families’ social class or financial status - your family can easily resolve your family’s financial bind.”

Challenge 1: Poor Financial Management

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You could earn millions but if you are financially disorganised money problems are inevitable and the same principle applies if you earn less than enough or just enough for a comfortable lifestyle.

• Walk the talk, which means, be proactive and stick to the plan(s), to correctly resolve each financial hurdle and to avoid repeating or possible financial challenges 

The best way to be financially organised is to pay attention to your financial obligations through strategic plans that will have your money work for you and to achieve financial goals. 

Solution: Don’t Delay. Get Your Finances Organised

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Here are some examples of what you’ll need to do to get your financial affairs in order:-

1. Evaluate your financial habits - Do you save? Do you create and stick to your budget? Do you spend more than you make? Do you need to ditch the credit cards / restrict yourself to cash and cheque only?
   

2. Create your budget for a realistic approach to budget for and meet life’s financial obligations. For instance, a household budget to cover your lifestyle financial needs and wants and a holiday budget specific to your leisure / “time-off” plans  
   

3. Learn to pay yourself first. This means, prioritising your long-term financial wellbeing by setting aside funds for your own savings and investment accounts, whether you’re employed or self-employed
   

4. Understand your debts and create debt-paying plans that promptly and reasonably pay off debt without compromising other financial obligations. As an example, for existent debt-payment plans, you can review them to confirm that they continue to serve your best interests 
   

Challenge 2: Not Enough Revenue

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Not only is barely making it or having nothing a blow to one’s ego, but it takes a toll on your business goals, personal goals, family’s quality of living, and your finances.

The two main reasons why a family may not have enough to make ends meet are when the income earned is not enough and when too much debt is incurred. To address both or any of these reasons, your next step is to simplify and set up how to live within your means to reduce debt, save money, pay bills on time and increase your net worth. 

Solution: Identify & Understand Your Financial Tight-Spots 

1. For “Low, Too Little & No Income” Situations
   

• Either eliminate expenses and/or increase your monthly income.

For example, cut down or do away with some items on your discretionary fund/leisure budget, like stop / reduce takeout dining, cancel subscriptions or memberships for services you don’t or rarely use, switch to quality yet low-cost options

• Another solution when net income is a challenge, is to understand where your current funds go. 

This helps to determine how much more is required to cover necessities and wants and if an extra income source is required. For example, a part-time job may be necessary and you maybe need to invest more in your side-hustle(s), your spouse might need to get back to the “corporate world”, just  to name a few

2. For “Debt & Too Much Debt” Situations
   

• Make debt reduction a key priority

Make a list of all the debts you have and arrange them in order of priority to make sure you are repaying the most urgent ones first, such as mobile loans and other short-term high-interest loans.

Also, consider debt consolidation, especially if you have multiple loans. Through debt consolidation, you could get lower rates and affordable monthly repayment amounts. Learn more about debt consolidation here.

For example: student loans, car loan payments, mortgage, and student loan debt are less urgent and paid off over a few months or years, while short-term debts from mobile money borrowing and overdraft are more urgent and paid off in days or weeks.

• Be patient and be proud you’re doing more for you and your family

It’s not easy and it does take time but the relief of being debt-free or getting back to having manageable balances, is priceless 

• Make it a habit to save before spending

Once you are in the clear. Stay in the clear - which means avoid the temptation of racking up debts due to impulse buys and poor planning and/or due to no follow-through on your financial plans

3. For Job Loss / Retrenchment Situations
   

• Plan ahead for the “Ifs” in life 

We all agree that the “perfect job” doesn’t exist and for business owners, this means there’s no guarantee that business is always favourable. 

Planning is one way to soften the blow of losing a job for you and your family, especially where household budgets depend on one income 

• Ask the tough questions and have open conversations. For instance, what do you do if you or your spouse were to lose a job? What in your family expenses counts as needs and wants?  
  

Anyone’s job status, employed and self-employed, can change at any time. Take this problem-solving scenario example:

“If your spouse is the breadwinner and switched from self-employment to being employed; the plan in the event of job loss, could be to focus on self-employment opportunities as an income source, until your spouse gets a new job”

Challenge 3: Not Being On-The Same-Page With Your Spouse

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Your finances are private and it's not always easy to have the “money talk” with anyone, including your spouse. 

Studies show that though financial problems are one of the top causes of divorce worldwide; they have little to do with how much money each earns but more to do with little-to-no communication between the couple.

Solution: Have Open Conversations & Include Financial Experts (As-Need-Be) 

A lack of effort to learn how to work together eventually costs more emotionally and financially. Make sure you always have intentional and meaningful conversations, to achieve specific results, such as:-

• Understanding your financial situation so you and your spouse are on the same page
• Getting control of how money flows in and out of your life
• Developing the right money habits to succeed financially
• Understanding what money is, as well as, how to avoid and solve money problems 
  

Challenge 4: Overwhelming Health Care Costs

“Health is a priceless wealth. Invest while you can ~ Bryant McGill” 

Healthcare is an expensive necessity and high medical costs may be due to different factors like medications, hospital stays & visits (and so on) 

So, what next? Here is an expert tip

No matter how much your monthly income is, aim to set aside 5% - 10 % of your budget for health costs/health funds

Solution: Plan To Protect. Health Matters Are Not An Option

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Accurately budgeting for healthcare can be challenging given how unpredictable our bodies can be. Nevertheless, it is mandatory that you be adequately prepared.

In addition to the “5% - 10% tip,” here are some additional solutions:- 

1. Take advantage of the more affordable, quality healthcare options in the public and private healthcare sector.

• Health insurance cover provides financial protection and peace-of-mind for your family, so sign up for health insurance and pay your health insurance dues
  

2. Review your budget and opt to remove some items. Alternatively, you may set some budget items for later consideration. 

For example, “paying your insurance premiums should always take priority over any discretionary expenses. Treat as you would fixed expenses like your rent - you wouldn't go on a random trip to the Mara without paying your rent first, would you?"

3. Research and review your current healthcare options and insurance plans 

Though healthcare costs of minor illnesses and injuries can be overwhelming, you can minimise these bills with a comprehensive healthcare plan that balance-and-protect your family financial plans 

Challenge 5: Not Knowing How To Save / Not Saving At All

Usually, due to different circumstances, many people live paycheck to paycheck and even fewer can consistently save as much money as they would like for short-term and/or long-term goals.  

For families, the lack of savings means your family is facing a bleak financial future. 

Solution: Save More. Spend Less 

Here’s how to get started on the financial freedom you want for you and your family.

1. Saving For An Emergency Fund
   One of the easiest and top ways to have a stress-free financial experience is to adhere to the function of a financial service / financial product. For instance, an emergency fund is only used in emergencies, your savings account is for savings only and not to be used as a checking account for frequent payments
   

• An emergency fund also helps you avoid having to gain more / any debt due to emergency borrowing, especially in the event of job loss 
  

2. Saving For Retirement
   It is never too early to start saving for retirement.
   

Two simple ways to get started on your retirement saving:-

• Visit your local bank/banks for information on available retirement plans/pension schemes. These professional retirement products are set up to help you automate your savings deposit and are affordable to sign-up for
• Register for RBA Pension Schemes (Retirements Benefits Authority) a public platform available for Kenyan citizens. For more and to get started on your pension saving journey click https://www.rba.go.ke/  
  

3. Saving For A Home
   To own a home is at the top of most families' wish list; the reality though is that paying a down-payment can be difficult and paying off your house payments is often just as difficult.
   

For uncomplicated guidelines on how to start, get a financial planner or a realtor involved, to help you get your savings plan in order and you can be a homeowner in no time.

• Finance experts advise that you avoid private mortgage insurance and opt to save up at least 20% of your future home’s down-payment. This smart money move makes it possible for you to gain instant equity, which allows you to borrow against the value of your home
  

*Home Equity Definition – The portion of your home that you have paid off, that is your stake in the* property and is your most valuable asset as a homeowner.

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You Have The Power To Do More. Make It Happen

Money is an asset to have and as a topic, it is a continuous and evolving subject. 
Always remember, whether you’re on top of things financially or still have a long way to go, financial issues are inevitable (and most importantly) shouldn’t be ignored. Make a plan to face your financial challenges and get to improve on your money management habits and you’re likely to get the job done, usually in a shorter time than you think.