Top reasons people end up in financial difficulty

Some people always find a way to find schadenfreude, or joy from others misfortune, and witnessing the breakdown of a person's or families finances will lead to these very people claiming that irresponsible spending created the wallet-ache - but how often is this actually the case?

People seldom begin by overspending compared to their take home pay, but many neglect the chances of their income reducing. It is often stated that people fall into the trap of feeling the chances of their circumstances changing being slim, however they are soon awakened to reality and the new age, where jobs don't last a lifetime. This applies greatly in the most cited cause for financial difficulty, reduced income. Here financial planning starts to make a great deal more sense.

If it is apparent that income will be depressed for more than a very short period of time, expenditure must be reduced to bring it into line with the new lower income. Where people hang on to old lifestyles, including superfluous possessions, it enhances the likelihood of falling into a debt trap.

In the current economy, the time taken to find new work after leaving employment can vary greatly depending upon demand and competition for the particular skill-set. If people adjust quickly to their proposed outlook they have a much better chance of surviving without ending up truly in trouble.

Creating a budget doesn't take a huge amount of time, or thought really – Walleto.co.uk provides a budget planner to precisely take neither! Once armed with an overview of where money is escaping to at the end of every month, areas for adjustments can be identified.

Another major cause of financial plight is the breakdown of a relationship, in particular divorce. Not only a terrible and compromised situation in and of itself, but one that will like cause expenditure of it's own. Legal costs, both accrued due to negotiation and division of assets, cause unplanned costs (the reality of the financial costs of divorce are rarely thought through). Compromises could lead to lifestyle changes where additional monthly expenditure is unavoidable, so whereas incomes are possibly reduced - expenses increase.

As expected, hubris makes an appearance in this list, so those annoying people may have had a point. The simple fact is that most people do not put enough aside from each payslip to create a rainy-day fund. The old adage was to always have at least three months worth of living costs stored in a savings account as quickly as possible and this still holds true. Financial stress will occur immediately in case of emergencies when there are no savings to call upon. The only resort at that point is to use some form of short term credit, such as a loan or credit card - and that's where the debt spiral can begin.

Wrapping up the overlords of monetary mayhem is a little known, but unfortunately common cause of financial problems. Gambling, whether it be a social flutter or damaging addiction, it can lead to terrific losses and many addicts tend to start to borrow when these mount up in a vain effort to 'win' back their money.

So, if avoiding getting into debt and leading a stress free financial life is a priority then the easy rules to abide by are:

• make a budget
• stick to the budget
• put any surplus money into a savings account
• constantly review the budget if any circumstances change
• rinse and repeat!