Search for Savings & Loans
The 5 Primary Causes of Financial Problems (And What to Do)
The 5 Primary Causes of Financial Problems (And What to Do)
See The Best Loans Available in Kenya Today
Money Management

The 5 Primary Causes of Financial Problems (And What to Do)

Eunniah Mbabazi
July 14, 2022

Are you constantly feeling that you are struggling financially? Do your bills and expenses cause a shiver down your spine, because you are afraid your money will not be enough? 

Are you constantly sitting at the edge of your chair, crossing fingers that a huge financial emergency does not come to you?

If you answered yes to any of these questions, you may be experiencing one of the many forms of financial problems that most people face on a daily basis.

Everyone yearns to have a blissful life, free of worry, affording whatever one wants and not being limited in the choices that are realistically available to them.

However, this never really happens for most people - and that’s okay, save for when you find things not going your way in several directions and now it is no longer about not really being able to have it all, but there being an underlying flaw in your money management system. 

Here, we explore some of the major causes of financial problems and how to start dealing with them. 

1. Lack of Budgeting

A budget is one of the best methods you can use to combat financial problems. Being the backbone of your entire financial life, everything rises and falls with the budget. Well, it is going to certainly be mostly falling without a budget.

A budget gives you clarity about your financial situation, which makes it easier to make smart and effective situations.

When you know exactly what’s coming in, exactly what’s going out and where it is going, it becomes easier to address financial problems ahead of time.

Not having a budget means you are spending blindly. You are shopping for both needs and wants without putting an exact figure on how much you have spent so far (you are not tracking expenses). 

What this means is you are likely to suddenly run out of cash in the middle of the month, thus throwing yourself into debt. Most importantly, you are likely to be undersaving, saving irregularly or not saving at all. Worse, failure to have and stick to a budget could mean dependency on consumer credit. 

Tip: If you have never set a budget for yourself before, make use of the 50/30/20 budgeting rule that suggests you spend 50% of your income on basic living expenses (needs), 30% on wants, and 20% on saving for the future. This is a good beginner budget type that you can use, tweak and build your way up.

Read Also: The 7 Types of Personal Budgets and How to Choose

2. Over-reliance on a Single Source of Income

If all your income is from a single source, then it might be time to rethink this strategy. If this source is employment, think about impromptu layoffs, or company closures that have become more frequent even post-pandemic. 

If this single source is business, think of periods when business might begin running into losses, for instance, when Covid-19 lockdowns forced hotels and bars to close down.

If any of the above scenarios happen to you, you may start having financial troubles. Because as much as you may run out of cash, including savings if any, your bills and expenses in most cases will never go away.

Tip: Try to diversify your income as much as possible. If you have an 8 to 5 job, consider looking for other side jobs, especially ones you can do virtually, such as being an online tutor for foreign languages.

Think of investments that will give you regular passive income. This cushion is both to ensure you can easily foot your expenses in the short-term and even more important, you can fund more stabilising long-term goals such as home-ownership.

Read Also: 8 Ideas to Create Multiple Sources of Income

3. Lack of Emergency Fund

Not having an emergency fund means that in the unfortunate event that you run into a financial emergency, your world might be turned upside down. An example of a financial emergency could range from urgent medical bills after hospitalisation, job losses, or breakdown of your car.

When any of this happens while you don’t have an emergency fund, your only saving grace would be to drain your savings account (if you have one), or worse running into debts. This can be massively destabilising and take much longer to recover from. 

Tip: As hard as it may seem, start small and build an emergency fund that could comfortably cover your expenses for between 3 and 6 months, in the unfortunate event of a job loss.

And even if you do not lose your job, a sufficient emergency fund can also act as a psychological cushion propelling you to take on your financial goals with more confidence; you can take bigger risks, walk out of bad deals etc. without running into debilitating consumer debt.

Read Also: Easy Steps to Create an Emergency Fund in 100 Days

4. Unnecessary Debts

Unnecessary debt could arise from living beyond your means or simply put, irresponsible spending that depletes your income too soon. 

Don’t get it wrong, debt can be a fuel for financial growth. In fact some of the most financially successful people the world over have made their wealth using other people’s money.

The problematic debt that is termed unnecessary is that which is taken to fuel a lifestyle, or rather getting into debt for reasons other than increasing your net worth or emergency. 

If you find yourself going into debt to pay for recurring bills such as rent, meet obligations such as school fees or fund discretionary activities such a vacation - it is time to start re-evaluating your financial decisions and priorities. 

Tip: Learn the art of setting your financial goals, and working out a saving and or investment plan for them. For instance, if you want to buy a refrigerator, a sofa set, or even a car, create an initiative of saving every month, week, or day towards it, instead of taking a loan to buy them (avoid instant gratification).

If you are going to take a loan, try as much as possible to take one that puts more money in your pocket in the form of investment. For example, a business loan should typically pay for itself as compared to a loan to upgrade your kitchen appliances. 

Create a working budget, and stick to it. This insulates you from living beyond your means and unnecessary spending.

5. Fraud/Scams

If you are going through hard financial times, or are looking to diversify your income, you might be quick to respond to adventures that have a promise of high returns, over a short period of time, with minimum effort. 

This is the modus operandi of all grand scams; even pyramid schemes. In the long run, these will drive you into deeper financial troubles. 

Now, the cases of online scams such as Amazon Web Worker, multi-level marketing, and the numerous off-plan housing scams may be top of mind. But there are many other less publicised scams that are simply a failure to do the necessary due diligence - which then transcends all monetary transactions.  

Every time you open your wallet, there is a potential you are either not getting the right value for money or you are ultimately losing money. And this can add up pretty fast. 

Tip: The best way to protect yourself from fraudsters or scammers is to take your time to do a background check of every person or company that promises you ‘heaven’. Ask questions, visit their offices, ask your friends about previous experiences.

Even if you are having a hard time financially, it is important to remember that no one gives you money for free. If you are not working for what they are promising you, then you are being scammed.


Although some financial problems might be unforeseen, like losing a job that throws your budget out of place, thinking about these problems, and planning around them goes a long way in making sure you stay afloat with your finances.

Eunniah is an experienced business writer and editor. She is also a published author with two titles under her belt; Breaking Down and If My Bones Could Speak. You can find Eunniah on Twitter @Eunnyversal

Download the new Money254 App and don’t miss out on the next article.

Join 1.5M Kenyans using Money254 to find better loans, savings accounts, and money tips today.
Get it on Google Play

Learn more about Personal Loans available in Kenya on Money254

Money 254 is a new platform focused on helping you make more out of the money you have. We've created a simple, fast and secure way to find and compare financial products that best match your needs. All of the information shown is from products available at established financial institutions that our team of experts has tirelessly collected.

Instantly search loan products from established providers in Kenya and compare on the terms that matter most to you.
Find the best Personal Loans for me

Don't miss another article - download the new Money254 App Today

Get it on Google Play

Sign up for our newsletter and get weekly money tips to your inbox.

Get updates from the Money254 team on financial news and new Money254 features.
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.