By Charlestien Harris, Retired Financial Coach at Southern Bancorp
I have been talking basketball all month long, and with the Final Four games about to take place, I would be remiss if I did not talk about four of the most common financial challenges people face today. A financial challenge is an event or obstacle that can wreak havoc on an individual’s or business’s economic stability, hindering the ability to manage expenses, debt, or cash flow effectively.
This closely mirrors the basketball tournament’s theme. You can make it to the Final Four, but obstacles – such as opposing teams – can upend your dream of becoming the number one team in the nation. By the same token, these four money issues can upend a near-perfect budget that you so carefully planned. Let’s take a look at these issues and some solutions you can use to avoid them.
1. Carrying Too Much Debt or High-Interest Debt
Carrying a high amount of debt is one of the most common financial challenges consumers face in today’s financial environment. According to a study reported by Experian and conducted by The Motley Fool, the average household carries at least $105,056 in total consumer debt. The four most common categories include mortgages, student loans, credit cards, and auto loans.
Most high-interest debt comes from two common sources: credit cards and predatory loans. Getting out of debt often requires a clear, strategic repayment plan and, in many cases, professional assistance. Southern Bancorp offers financial counseling, as well as housing counseling, to assist the communities it serves. Contact your nearest branch to locate a counselor.
2. Carrying a Large Amount of Student Loan Debt
Earning a college degree can improve your earning potential, but the cost of that degree can result in a significant amount of debt. Repaying student loans can be especially challenging if your income does not adequately support your monthly payment obligations.
Heavy student loan burdens may force individuals to delay milestones such as homebuying, starting a family, and saving for retirement. While this is not an exhaustive list, potential solutions include applying for loan forgiveness programs, refinancing loans through private lenders, taking advantage of employer repayment assistance when available, or enrolling in an income-driven repayment plan, which is based on income and family size.
3. Not Having Enough Saved for Retirement
Many adults are concerned about retirement savings, especially since Social Security alone may not be sufficient. Retirement may feel “a long way off” when you are young, or it may seem to sneak up on you during mid- or late-career stages.
Contributions to IRAs and 401(k)s are often among the first budget items cut when finances are tight. However, even small contributions made early can benefit greatly from compound interest. If you are trying to catch up, consider contributing the maximum amount allowed to retirement accounts, focusing on paying down high-interest debt, ensuring you have adequate insurance to protect your income, or opening different types of retirement accounts.
4. Finding Affordable Housing
Whether you rent or buy, finding affordable housing can be challenging. Rising rental costs and high mortgage rates have made both renting a significant burden and buying a home more difficult. The limited supply of rental units and homes available for purchase further compounds the problem.
Spending more than 30 percent of your income on housing can strain your budget and create shortfalls in other spending categories. Consider exploring state-specific down payment assistance programs and seeking HUD-approved housing counseling services to help you prepare for homeownership. Southern Bancorp offers HUD housing counseling, and additional resources are available at www.hud.gov.
The financial challenges outlined above do not have to define your entire financial picture. Learning as much as you can about improving your finances and taking advantage of available financial services and resources can help you overcome these common obstacles. Experts emphasize that consistent, small habits often produce more significant results than a single drastic change.
For more information on this and other financial topics, you may email me at [email protected] or write to me at P.O. Box 1825, Clarksdale, MS 38614.
Until next week – stay financially fit!
