As the recent devastating downpours lashed the island of Jamaica, many people who lived close to rivers and gullies were terrified as the torrents tore away at the land beside their dwelling places. Unfortunately, several ill-fated persons watched helplessly as their homes eventually broke apart and tumbled into the raging flood waters.

Tropical Storm Nicole highlighted the fact that even the most placid streams can become destructive floods when weather conditions deteriorate. However, while those who resided near to these out-of-control waterways were living in danger, other persons whose residences were built on more solid ground were relatively unscathed by the natural disaster.

As I reflected on these tragic occurrences, I realised that many people, just like those who lived beside potentially dangerous water courses, are living on the edge when it comes to their finances. While circumstances are favourable, they exist with a false sense of security about their money situation; but in reality, their financial foundation is weak and unable to withstand even the smallest of challenges.

What are some of the actions that can cause you to teeter on the brink of financial destruction?

1. Depending on debt to pay bills

Due to the difficulties of a tough economy, you may be forced to get into debt to make ends meet. Short-term loans, payroll advances, credit cards and borrowing from family and friends, are some of the options you use to survive when you don’t have enough money to pay for even basic necessities. Unfortunately, while borrowing might temporarily relieve your money shortfalls, you are actually digging a very deep hole that will eventually lead to certain financial collapse.

2. Neglecting to save

Today’s society revels in consumerism, where lavish spending is placed before prudent saving. Whether you have excess income or are barely getting by, you may prefer to seek after the immediate pleasures of life rather than delay gratification for the future. Consequently you ignore the importance of putting aside funds for emergency needs, which leaves you exposed and vulnerable, completely unprepared for the negative effects of financial crises.

3. Not setting goals for future needs

One of the main reasons why you may find it hard to attain financial security is that you don’t focus on setting money goals for yourself. Because you fail to create a vision for your life and determine a practical action plan to attain your objectives, you are like a ship sailing on the seas without direction or purpose. When the inevitable tempests of life appear, you’re buffeted by the waves and remain adrift without a strategy to get back on a course for success.

4. Having inadequate insurance

When things are going your way, you naively ignore the harsh eventualities of life. Sickness, accidents, natural disasters and early death are all possibilities that you must consider in order to build a foundation that can weather any financial storm. You may think that you are throwing money down the drain by buying insurance for your life or property, instead of realising that you are investing in security for you and your family.

5. Taking unwise investing risks

While some amount of risk taking is necessary for getting ahead in life, you may take unnecessary chances with your money in your search for wealth. You focus on the positive side, thinking that your investing or business ventures can only result in a perfect outcome. However, you pay no attention to the likelihood of your plans going awry and the possible financial consequences of failure. This may cause you to accept too much risk and can lead to regrets about your decisions.

6. Not looking for ways to earn more

Despite reality staring you in the face that your present income is insufficient for you to pay your bills, keep out of unnecessary debt, save for emergencies and plan for the future, you hope that some miracle will resolve your problems. You continue to spend without budgeting, ignore past due notices and borrow money to tide you over, instead of looking for a means to increase your earnings.

Don’t be like those unfortunate persons who woke from deep slumber to find their homes submerged in water. Most of the problems that are presently undermining your financial foundation can be resolved if you become more industrious about earning more. Determine how much more money you need to live comfortably, save towards the future and mitigate money risks. Then consider various ways to use your talents and creativity to fill people’s needs and solve their problems for profit.

Next week, we will offer some more ideas for creating extra income.

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Cherryl is a financial consultant and money coach, and founder of Financially S.M.A.R.T. Services; she is currently writing her first book, “The 3 Ms of Money.” Get more practical financial advice at www.financiallysmartadvice.com and free financial tools at www.financiallysmartonline.com. Please email comments to cherryl@financiallysmartonline.com