When life throws you curveballs, you’re going to hit a few dingers. But when financial disasters happen, it can be hard to discern whether it’s a temporary hardship or “financial hardship.”
There are several financial hardship examples people experience. But some of them may have reason to feel more deserving of relief than others. And that’s where trying to decide if you’re experiencing more hardship than normal will come into play.
So, how do you define financial hardship? How do you know whether the harm and issues you’re currently experiencing qualify? Keep reading to find out!
1. Living on a Fixed Income
It can present itself in various forms, many of which are due to a limited budget. A lack of discretionary funds makes it financial difficulties to buy necessary items like groceries or health care.
Moreover, retirees on fixed incomes may lose purchasing power due to inflation. Ultimately, the challenge of living on a fixed income is one that many must realize every month. It should be kept in mind when developing strategies for financial stability.
2. Being Underemployed
Underemployment may include working part-time hours, working for the least wage, or not having a job that matches one’s educational background. Underemployment can mean not having the financial means to cover bills and debt payments, resulting in late payments and fees, and interest charges.
People struggle to make rent and mortgage payments. Transportation can be difficult because they may not be able to afford car payments or fuel costs. Additionally, underemployment can strain food budgets. Making it difficult to pay for everyday items, and forcing people to choose between paying for medicine and other essential items.
3. Inadequate Access to Credit
This can include not having enough money to make ends meet, not being able to pay the bills on time, running out of money before the end of the month, and having to borrow money from friends and family.
These money troubles can also limit a person’s ability to save. Leading to an inability to invest or pay for college or other educational opportunities. Lastly, inadequate access to credit can lead to debts from high-interest loans or credit cards.
4. Financial Illiteracy
Financial illiteracy is often the root cause of financial hardship. An individual’s lack of financial knowledge can lead to poor budgeting and money management skills.
People with low financial literacy are often unable to find financial pitfalls before they occur, thus leading to financial hardship. Improving financial literacy education and raising awareness of money troubles are key components in helping people achieve financial success.
5. Medical Debts
Due to unexpected illnesses or injuries, individuals and families may suddenly find themselves with high medical bills. Even those with insurance will have to deal with deductibles, co-pays, and other associated healthcare expenses that can quickly add up and become difficult to manage.
Medical debts can leave individuals and families struggling to cover basic needs or other financial obligations. Without an emergency fund or other resources to tap into. Medical debts can spiral quickly and leave a person in debt for many months or even years.
6. Lack of Financial Planning
Poor planning can cause people to fail to keep track of their bills or to forget when payments are due, resulting in high penalties or missed payments. All of these behaviors can quickly lead to financial hardship. People find themselves unable to pay their bills or worse, in debt.
Financial planning is a crucial factor in avoiding financial hardship, but too often people tend to overlook it until financial troubles arise. One of the most common forms of money trouble people can face is having unfiled IRS tax returns due to a lack of financial planning.
7. Inadequate Savings
This refers to not having enough money saved up to cover unexpected costs or to meet long-term savings goals. Additionally, inadequate savings can leave individuals more vulnerable to medical expenses, job loss, and even unexpected financial disasters such as natural disasters.
To combat these issues, people should ensure they are saving an adequate amount of money each month, build a strong emergency fund, and consider budgeting and investing for added financial security.
8. Out-Of-Pocket Costs for Housing
Rent-to-own agreements, high moving costs, and utility bills are examples of expenses that can leave families in a tight financial situation. However, if unable to pay, this could lead to missed payments and late fees, putting a strain on the individual or family’s financial situation.
Additionally, emergency repairs or changes in the housing market can strain the family’s budget even further. Individuals need to be aware of these out-of-pocket costs when considering their housing options.
9. Education
Financial hardship is a problem many college students face even when they are diligent in budgeting. Without adequate financial aid, it can be difficult to pay for tuition, living expenses, and textbooks.
Additionally, if the student is relying on part-time income, fluctuations in hours and pay can create a financial burden and cause the student to miss a payment or two. Emergencies and rising tuition costs forced upon by sudden budget cuts from the school can also be hard to manage without emergency funds.
10. Childcare
Regarding childcare, there are several common money troubles people run into, such as the high costs associated with caring for children. These costs may include daycare fees, after-school care, school books, extracurricular activities, and other carers’ costs.
Many parents may struggle to stretch the family budget to cover the costs of childcare. And if the costs become too expensive, they may be forced to make the difficult decision of not being able to afford childcare altogether. This can cripple families financially and can sometimes force parents in or out of work due to the lack of access to childcare.
Types of Financial Hardship Examples
These financial hardship examples are something that many people face. Common money troubles that arise include not being able to make rent, having to choose which bills to pay, and regularly having to go without necessities. Fortunately, there are resources available that can help. If you’re stuck in financial hardship, seek out help right away.
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