Being prepared in our finances can empower us because it impacts all of the areas of our life. Knowing this simple fact led me to put together a five phase journey based on my own experience with finances and the experiences of those I’ve helped along the way. My hope is that this framework will show you the path to financial freedom.
Knowing where you are at and which direction you’re heading in is vital to moving towards where you ultimately want your end destination to be. These are the five phases we went through. If you can identify which of the behavioral phases you are in, you’ll also be able to identify the steps you need to take to move forward on your journey.
Wondering which phase you are in? Check out my 5 behavioral phases of the finance journey!
Phase 1 – Denial
This is where most people begin their financial journey. When my husband and I were first married, we were definitely in denial about our finances. We thought we had all of the money in the world and we were spending on credit like there was no tomorrow. We racked up debt on over 11 credit cards. Since we could afford the minimum payments on them, we thought we were fine. You know the motto, “Buy now, pay later”? That was us. Trust me, we sure did pay later!
We were in denial that we couldn’t really afford these things. We were in denial that we had a spending problem.
Phase 2 – Avoidance
In this phase, you start to recognize that you have a spending problem, but you’re doing things to avoid the issue because you don’t want to deal with it. But, at the end of every month, you need to come up with money to pay the bills and you’re noticing that your credit cards are maxed out.
For us, we had our 11 credit cards, and we found ourselves signing up for new credit cards each month with 0% interest rates. Then, we would transfer our balance from one credit card with a high interest rate to this new low interest card. Essentially, we were just moving our problems around – not solving them.
This process took care of some of the fees, but it didn’t solve the actual problem – which was our spending. We knew there was a problem, but we were avoiding it. We didn’t want to address it.
Phase 3 – Frustration
Eventually, if you are stuck in the denial or avoidance phases for long enough, you will start to get frustrated with your lifestyle. Living paycheck-to-paycheck, being tired every month of not knowing where all of your money is going, and having those arguments every month with your spouse or partner about money are just so frustrating.
That level of frustration at not knowing where your money is going, being disorganized with your finances, and over spending will start to build up and catch up to you. For myself and my husband we were in the avoidance and frustration phases for a long time. We finally decided enough was enough and we didn’t want to be stressed out and frustrated anymore. This led us into the next phase.
Phase 4 – Exploring
Once you’ve decided that you’ve had enough of the stress and frustration, you’ll begin to explore your options. We knew we needed to do something so we started to look at our situation and considered getting outside help. We took a good hard look at our lives and began to think about what it is that we wanted for our future.
Whether or not you do this yourself with all of the resources out there, you ask family and friends for tips and suggestions, or you get professional help, it’s important to find a solution to the problem you are having and begin to work on the issues. And this slowly moves you towards the final phase – the place where we all want to be!
Phase 5 – Control
The final stage brings us confidence and control. This is where we all hope to end up with peace of mind and stress free living. This is what we all want for our lives and our families.
Ask yourself – which phase are you in now? This might sound crazy, but if you are in the frustration phase, this is a great place to be! Here’s why: If you are frustrated, you’re likely ready to take action and make a change.
Now that you’ve identified which of the behavioral phases you’re at, it’s time to make a plan to move you along on your journey. Lucky for you, I can help with that! Let’s set a time for us to chat about how we can get you in control of your finances!
I have to admit, years ago, there was a time in my life when I exhibited all 10 of these signs of financial struggles. It started right around the time my husband and I got married in 2006. We were spending, spending, spending – and we had no idea how bad of a situation we were getting ourselves into. Honestly, I don’t even know what we were spending on. We had multiple credit cards open and we were racking up the debt faster than we could pay it off!
In the beginning, we were only experiencing 1, or 2, or 3 of these signs, but before we knew it, we were experiencing almost every single one.
Does this sound familiar?
If this sounds like you, I want you to know, you are not alone and even reading this shows me that you are heading in the right direction. In order to resolve and take care of an issue, you need to acknowledge it. My hope is that you’ll see these signs and if you recognize them in yourself, you’ll make the decision to take action before things get too far along.
Here are 10 signs financial struggles might be creeping up on you:
You Don’t Know How Much You Owe
Credit cards, loans galore – it can be so overwhelming. Do you feel like there’s just so much, you decide to push it to the back of your mind and ignore it or pretend it’s not there? If that’s you, the financial struggle is real.
You’re Arguing with Your Partner About Money
When arguments continually center around money, finances, and spending – your financial struggles are a real problem.This arguing can start out small and escalate, especially if one person is a saver and the other is a spender. When both spouses aren’t on the same page about spending, it results in tension and, over time, this tension puts a strain on your relationship.
You Need to Use Credit Cards to Cover Expenses
You know you don’t have money in the bank but you’ve got a handy-dandy credit card in your pocket. So you buy now and pay for it later. This leads to rapidly racking up credit card debt. It’s time to really look at your finances if you always find yourself relying on your credit cards.
You’re Only Able to Make Minimum Payments
If you are only able to make the minimum monthly payments on your loans and bills, it is a sign that your finances might not be where you need them to be. When you have multiple credit cards and loans, those minimum payments add up and the balance never appears to get smaller due to interest.
You Frequently Make Late Payments and Overdraft Your Account
When you miss a payment or overdraft your account, you’ll get hit with loads of extra fees. No one wants additional fees – they really start to add up. And, mounting fees and charges will just add to your debt. If this happens to you frequently, it is definitely an underlying issue you’ll want to look at.
You Don’t Have a Savings or Emergency Fund
Emergencies happen, things break down, so it’s important to have a plan and some funds set aside for those unforeseen events and accidents. Without a savings or emergency fund, you’ll end up taking out more loans and using your credit cards. It can take a while to get to a place where you can set up a savings fund but the sooner you’re able to do this, the better off you’ll be.
You Find Yourself Borrowing from Family and Friends
When things are bad, you might feel like you have no other option than to rely on family and friends. Fortunately, this wasn’t a huge issue for us. If you rely on friends and family to bail you out, it is time to start establishing new financial habits to move towards financial security.
You’ve Requested an Increase on Credit Limits
Credit cards have limits to help us from not racking up more debt than we can payback. If you’ve hit that limit and you’re requesting more credit, that’s not a good sign. This goes hand-in-hand with opening up multiple credit cards. Or, have you found yourself getting creative with moving balances and debts from one place to another? If this is you, it might be time to take a good hard look at these habits.
You Have No Retirement Savings
This isn’t necessarily a sign you’re struggling, but it is something you want to start thinking about. I’m sure you don’t want to be working until you’re 80 or 90 – no one does! But if you are getting closer and closer to retirement age with no financial plan, you’re going to find yourself experiencing financial struggles. The later you start saving for retirement, the more difficult it will be to grow your funds into something you can live off of.
You’re Living Paycheck to Paycheck
If this is you – you get paid and you’re already relying on your next paycheck. If you’re in the vicious cycle of using your paycheck before it even hits your bank account, that is a really strong sign that you are struggling financially.
Take a step back, lay everything out, take a look at your situation, and be honest with yourself. Acknowledge and be aware of what is happening in your life and your finances. It is going to be okay. Now, let’s take some steps to move your family forward to a better financial space.
I’m holding a FREE live online Family Budget Planning Workshop at the end of August and I’d love to have you join me. Click here for all of the details so you can begin to manage and control your family without the overwhelm.
One skill so many parents wish they’d taught their kids is money management. I think it’s never too soon to talk to your kids about this. That doesn’t mean they will comprehend everything right away.
No kid is going to understand escrow or compound interest. (Many adults don’t even know what this is about.) But kids are smart these days.
Kids Learn About Money Management First by Observing Your Day to Day Purchases
Children hear and see things, absorbing everything like a sponge. But the fact is, almost 80% of Americans are living in debt, so I want to make sure my kid doesn’t grow up to be part of that statistic.
I’ve heard from quite a few parents about why they haven’t talked to their kids about money. Their reasoning is that they don’t know how or when to bring it up.
Opportunities to Teach Your Kids About Money Are All Around You
The thing is, kids know a lot more than you might think. For instance, they already know that mommy and/or daddy has to leave the house most days to go to work.
They know that we go to the store and come back home with new things. They see that we have these cards and bills in our purses and wallets that we give to people at the store. So, they’re already picking up on most of the realities of money without having it spelled out for them.
Three signs that your children are ready for the “money talk” include:
1. They can count.
Counting numbers abstractly and counting money are two different concepts. But once they begin to understand numbers and how to count things, it’s a good sign they can understand money. That means you might want to let them do simple tasks like count out money when you are at the cash register or counting back your change.
2. They’re asking to buy toys.
When you go to the store, it can be really annoying when your kids start asking you to buy them things. (On a side note, does anyone else dread going to the store with their kids because all they want is for you to buy them stuff?) But this is also a great time to talk with your kids about the difference between something you need, something you want and how to delay gratification by saving up for your purchases.
3. They’re paying attention to purchases and how you handle money at the store.
This would be a great time to just talk about the general concept of money and debit cards. You might also want to explain to them about credit cards and how it can be dangerous to buy lots of stuff using these.
Discussing Money with Your Kids Is So Important
Talking to your kids about money is one of the most important talks you’ll have. But it’s a big step that will put them on the right path for financial literacy and independence. There’s so many tools and resources that can help you with this topic we’ve included a few links that may help: