While it is true that unexpected problems such as employment termination or medical expenses may cause financial difficulties, a good financial plan is what distinguishes a financial inconvenience from a financial difficulty. In most cases, the most serious financial hardships are caused by the following:
- Getting a high-interest loan to pay off home repairs in the midst of an existing difficulty in paying regular monthly bills.
- Purchasing a new house without any savings for emergencies.
- Being updated in paying a new 50-inch flat TV while falling behind in paying monthly rentals.
- Buying a new car barely two years after declaring bankruptcy.