Major Causes of Financial Problems

 Struggling financially? A lot of people are even though they give everyone the impression that they have it all done. They are working, live in a nice house, and drive a nice car, but are living from payday to payday. Here are 8 major causes of poverty in the first world.

Living beyond your means

There is no getting away from it. If you spend more money than you earn then you must be getting your extra money from somewhere and that almost always means borrowed money, also called buying on credit. There is a cost to all of this and it is called interest. If you are in the habit of buying stuff on credit then the interest you are paying during your lifetime will add up to a fortune. The interest is sometimes called dead money because you have nothing to show for all of the interest you are paying.

Think of what you could have spent with all of that interest. It is almost too painful to even think about but if you are to avoid poverty then you need to pull your head out of the sand and face the facts; your financial future depends on it.

Keeping up with the Joneses

Some people try to keep up with their peers with whatever they spend their money on. It's a compulsion that will cost you plenty. Living up to some kind of self-image will severely dent your finances and will prove costly by the time you stop working. You may think your peers are doing well financially to afford this stuff or even think they have done well for themselves, but what you don't know may surprise you. That they may be up to their eyeballs in debt. Even if they are living within their means to finance their lifestyle it does not mean you have to keep up with them.

Don't be a people pleaser and live up to other people's expectations, live according to what is the right course of action for your own circumstances and you will be far happier.

Consumer Debt

Consumer debt or dumb debt as it is often called is purchasing stuff with borrowed money. It is spending tomorrow's income today. Debtors are usually oblivious to what is happening to the so-called stuff they bought on credit; that their newly acquired possessions are worth less the minute they bought them. A crucial factor that needs to be observed is this; The money owed on the item is always more than what the item is worth. No one so many people are caught up in the debt-poverty cycle and it is not just those on lower incomes; in fact, people on a middle income are prone to this trap.

Commercial Greed

Commercialism during the 20th century has brought a lot of prosperity; it has provided jobs and created countless businesses but there is another side to it. First world poverty is caused by an insatiable appetite for things. People are not content with just the stuff they need but keep wanting more. This all has to be paid for, it is money that could have been used to build a financial base for their future.

Addictions

Addictions are very expensive; just ask any smokers. One does not need to be a mathematician to calculate how much cigarette smokers are paying for their addictions. It is estimated at over $100 NZ per week. That equates to five grand per year and fifty grand per decade. No wonder many smokers are broke. It is the same with those who are addicted to alcohol and the pokies.

Financial illiteracy

Financial illiteracy is the major cause of financial poverty and it is not only those with low incomes who are financially illiterate; people on a high incomes can also be guilty of this. You hear stories of successful sportspeople who earned millions during their heyday but are broke years after retirement. It is important to save and invest your money during your best earning years to set you up for when you are no longer earning as much.

Irresponsibility

Not taking responsibility for your own finances is irresponsible. They will come up with all kinds of excuses why they have not joined KiwiSaver or are not contributing. Excuses such as, "You can't take it all with you," "I might die before retirement," or "I'm only young." People who are irresponsible with their finances tend to be irresponsible in other areas of their lives as well. Making commitments whether it is in a relationship, owning a house or car, or saving for your retirement takes responsibility and that is what separates the men from the boys.