5 Consequences of Managing Money Unwisely

Managing Money Unwisely

Learning how to manage money is an essential life skill. Poor financial habits that are set early in a person’s life often become permanent and lead to dire consequences. The following outlines five things that will happen when managing money is not properly done.

Inability to Budget

When a person does not know how much money is being spent and is not aware of limitations, there is no incentive to create a budget. A lack of budgeting results in overspending and being unable to save. The basic foundation of financial security is knowing exactly how much money is coming in and how it will be applied to weekly and monthly living expenses. Without a firm budget, a person can get into trouble very quickly and find their life spiraling out of control.


Almost all adults carry debt, but not all debt is the same. Examples of good debt that builds credit are car and mortgage payments. Bad debt occurs when a person does not live within their means, resulting in over-limit credit cards and delinquent bills. Credit card debt is one of the worst negative financial situations to be in because of all the fees and interest charges it incurs, making it very difficult to pay off. Not paying utility bills can result in living without basics, such as water and electricity. In many cases, a hefty deposit is required to resume those services, increasing the person’s debt load.

Poor Credit Rating

A direct result of debt is a poor credit rating. This score can affect employment, ability to borrow and even act as a block to higher education, such as online master degree programs. Credit scores are based on several factors, namely payments that are on time each month. Missed and late payments will cause the score to plummet, and it may take years to recover, especially if there is a bankruptcy involved. Credit scores are also considered when renting a house or apartment, and a poor one will result in being turned down for consideration or having to settle for substandard conditions.

Inability to Meet Financial Obligations

Aside from housing and utilities, most people must also must provide for family members. Aging parents, spouses and children all have needs that must be met. A person who has not budgeted money and has fallen into debt will not be able to meet these obligations, which may lead to damaged and broken relationships on top of financial hardship. An inability to manage money is one of the leading causes of divorce and may also have an effect on future employment opportunities. Not paying child support could result in reduced visitation time or loss of parental rights.

No Savings

One of the worst consequences of poor money management is the inability to save. A person who spends indiscriminately will not be able to maintain a standard savings account or put money away for retirement. Life often brings unexpected surprises, such as car breakdowns, illness and unemployment. Not having a “rainy-day” fund could mean losing a home and an entire way of life in a short period of time. Those who have no retirement savings may have to move in with adult children or become dependent on wealthier friends in their golden years.

While a person can learn from mistakes and develop better money management skills over time, the best approach is to have positive habits from the start. Budgeting wisely, keeping up with bills, limiting credit card use, saving for emergencies and planning for retirement will result in a financially secure life.

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