Increasing Financial Awareness: Solutions to Overcome Personal

Financial Crisis

KETUT AYU SWANDEWI

NIM : 2211171101

ENGLISH LANGUAGE EDUCATION DEPARTMENT

FALCUTY OF DHARMA ACARYA
I GUSTI BAGUS SUGRIWA DENPASAR STATE HINDU UNIVERSITY
2024
 CHAPTER I
INTRODUCTION
1.1 Background of The Study

Financial management include financial resources, investments, and overall financial

management (Sukenti, 2023). Financial concepts encompass anything relating to money,
whether in the context of individuals, businesses, or governments. Financials
encompasses several facets of money, such as income, expenses, investments, retirement
planning, risk management, and more. A thorough understanding of finances allows a
person or entity to manage their money effectively, prepare for the future, and achieve
their financial objectives.
There are three sorts of financing, including:
1. Individual Finances
An individual's financial situation can be determined based on their income or
compensation. Then consider how their financial situation can meet all of that individual's
needs. Individual finances will usually examine a person's financial situation in the short,
medium, and long term. How do they spend the money they have to cover their living
expenses. An individual in good financial health will have an income that exceeds his
expenses. Meanwhile, people who are not in good financial shape will typically have high
levels of debt, a consumption lifestyle, and little savings.
2. Company's Financials
The next type of finance is a company's finances. This form of finance refers to the
financial situation of a firm, whether it is small, medium, or huge. Likewise with
government-owned businesses. A corporation with a strong financial situation will be
financially stable. If the company has a huge amount of cash and little or no debt. It
indicates that the company is in good financial standing. The development and expansion
of the balance, which is always positive each month, is one facet of the company's
outstanding success.
3. Government Finance
The following type of finance is government financing. One of the things that can
influence a country's financial situation is the level of welfare of its citizens. The
benchmarks used to analyse a country's financial situation are extremely complex. This is
caused by a variety of reasons including unemployment, poverty, currency exchange
rates, and people's purchasing power in the country.
Finance plays a significant role in the lives of individuals, businesses, and countries.
Good financial management will enable us to manage finances more effectively in both
our personal and professional lives. The following are some of the financial goals in
personal and professional life.
1. instil discipline and attitude.
Regular As previously said, finance encompasses all financial-related operations carried
out in a disciplined and ordered manner. This allows us to control, plan, and make the
most use of our financial resources. Everything we want to buy must be arranged
beforehand. Even though the goods to be purchased is reasonably inexpensive. In
business, discipline and regular financial management have a significant impact on the
company's financial stability and ability to avoid loss.
2. Maximising profit Individuals benefit from a well-planned financial procedure.
This will assist us achieve financial success. We can plan something grander for our own
future. Then we may plan for our old life so that we feel more secure without having to
worry about debt and other financial issues. Meanwhile, for the company, financial
management will have a significant impact on profits, which have the ability to grow
indefinitely or provide financial security for the future. Because we can never anticipate
with accuracy a company's future economic state.
3. Avoid debt
Some people think that humans will never be able to escape from debt. At first look, this
appears to be true: humans cannot survive without debt. Whether it is a debt for money,
commodities, or services. Furthermore, when requirements grow, it becomes easier for
people to go into debt to meet them. In truth, some of the desired needs are neither vital
or urgent. Similarly, when running a firm, business owners that want their company to
grow quickly will typically find it simple to get involved. Indeed, this can have a
negative impact on the company's financial situation. Should, when you decide to go into
debt, try to think about it thoroughly before you have difficulties repaying it.
4. Optimised Planning
We will be able to plan more effectively if we grasp what finance is, its benefits, types,
and aims. With diligent preparation, we may better plan for the future. We can live more
economically without worrying about debt. Meanwhile, for business owners, effective
financial planning will help them preserve optimum revenues. As a result, the company's
future becomes more concentrated, and its capital may be used wisely. 5. Successfully
Meet Financial Goals Of course, frequent and rigorous financial planning will help us
reach our financial goals. Whether it's via accumulating emergency funds, planning
retirement funds, wedding funds, or achieving financial freedom. We will no longer
struggle to manage our finances.

However, currently there are still many people in the current generation who don't pay
attention and think finances are not important. This research is needed regarding
solutions to avoid personal financial crises. This research was structured to address these
questions:

1. What makes someone experience a financial crisis?

2. What is the solution to overcome a personal financial crisis?

 CHAPTER II
DISCUSSION
21. Theory
Theory of Planned Behavior (TPB)
The theory of planned behavior explains that a person's behavior is influenced by the
intentions they have, these intentions then form motivation which can encourage a person to
pursue planned behavior (Ajzen, 1991). This theory is based on the assumption that humans
usually behave wisely and take into account the information they obtain to consider the
impact of their actions. Three component the main TPB are:
 Attitude Toward the Behavior: This refers to an individual's positive or negative
evaluation of performing a particular behavior. In financial terms, it includes attitudes
toward spending, saving, borrowing, and investing.
 Subjective Norms: These are the perceived social pressures to perform or not
perform a particular behavior. This can include societal expectations, cultural norms,
and the influence of family and friends on financial decisions.
 Perceived Behavioral Control: This refers to the perceived ease or difficulty of
performing the behavior and is related to past experiences as well as anticipated
obstacles. It reflects confidence in the ability to execute financial plans and control
spending.
2.2 Factors Causing Personal Financial Crisis

2.2.1 Uncontrolled Spending

 Attitude Toward Spending: According to the Theory of Planned Behavior (TPB),

individuals with a positive attitude towards unplanned or impulsive spending tend to
overspend. This behavior is common among people who prioritize consumerist habits
over saving. For instance, someone who frequently buys the latest gadgets or fashion
items without considering their financial situation is likely to spend beyond their
means. This pattern of behavior can lead to financial instability, as the lack of savings
and impulse purchases create a cycle of spending that is difficult to break.
  Subjective Norms: Social pressure to maintain a certain lifestyle can also lead to
uncontrolled spending. For example, the desire to keep up with friends who take
expensive vacations or own luxury items can push someone to spend more than they
can afford. Media and advertising often promote an image of success tied to material
possessions, which can further influence individuals to make purchases that exceed
their budget. This societal pressure to conform can result in accumulating debt and
financial stress.

2.2.2 Lack of Financial Literacy

 Perceived Behavioral Control: Many individuals struggle to manage their finances

due to a lack of financial literacy. Without adequate knowledge and skills in financial
planning, they may make poor financial decisions, such as taking out high-interest
loans or failing to create and follow a budget. For example, someone who does not
understand how interest rates work might take on a loan with unfavorable terms,
leading to unmanageable debt. The inability to budget effectively can also result in
living pay check to pay check, with no savings for emergencies or future needs.
 Impact of Financial Illiteracy: The consequences of financial illiteracy are far-
reaching. Individuals who lack financial knowledge are more likely to fall victim to
predatory lending practices, invest unwisely, or ignore the importance of saving for
retirement. This lack of understanding can create a cycle of financial instability,
where poor decisions lead to further financial difficulties. Improving financial literacy
through education and resources is essential to empower individuals to make
informed and beneficial financial choices.

2.2.3 Excessive Debt

 Subjective Norms: In some cultures, borrowing money is considered a normal or

even necessary step to achieve significant life goals, such as buying a house or a car.
However, if debt is not managed properly, it can quickly become a significant burden.
For example, taking on a large mortgage or car loan without a clear repayment plan
can lead to financial strain. Cultural norms that encourage borrowing can also make it
socially acceptable to live beyond one's means, increasing the risk of financial crisis
when debts become unmanageable.
  Perceived Behavioral Control: Individuals who feel unable to control their spending
are more prone to accumulating excessive debt. This lack of control can stem from
poor budgeting skills, a tendency towards impulsive purchases, or a reliance on credit
to maintain a certain lifestyle. For instance, using credit cards to fund everyday
expenses without tracking the accumulating debt can lead to a financial crisis when
repayments become due. Feeling overwhelmed by debt can also lead to a sense of
helplessness, making it difficult to take proactive steps towards financial recovery.

2.3 Solutions to Overcome Personal Financial Crisis

2.3.1 Financial Education and Literacy

 Attitude Toward the Behavior: Improving financial literacy through education can
significantly change individuals' attitudes towards money management. When people
understand financial concepts, they are more likely to prioritize saving and planning
for the future. This shift in attitude can lead to better financial habits, such as regularly
setting aside money for savings and being more cautious about unnecessary
expenditures.
 Implementation: Implementing financial education programs in schools and
communities can help raise awareness about the importance of wise financial
management. These programs can include workshops, seminars, and online courses
that cover essential topics like budgeting, saving, investing, and managing debt. By
providing individuals with the knowledge they need to make informed financial
decisions, these programs can foster a culture of financial responsibility.

2.3.2 Financial Planning and Budgeting

 Perceived Behavioral Control: Enhancing individuals' ability to plan and manage

budgets through financial tools and applications can help them feel more in control of
their finances. When people can see their income and expenses clearly, they can make
more informed decisions about how to allocate their resources.
 Implementation: Using financial management apps that allow individuals to track
their spending and income in real-time can make the budgeting process easier and
more effective. These apps can provide insights into spending patterns, help set
realistic financial goals, and send alerts when users are nearing their budget limits. By
 making financial planning more accessible and manageable, these tools can empower
people to take control of their financial health.

2.3.3 Debt Management

 Attitude Toward the Behavior: Encouraging a negative attitude towards consumer

debt and providing strategies to reduce debt can help individuals get out of a financial
crisis. By understanding the drawbacks of excessive debt and learning how to manage
it effectively, people can develop healthier financial habits.
 Implementation: Financial counseling and debt management programs that offer
assistance in restructuring debt and creating realistic repayment plans can be very
beneficial. These programs can help individuals understand their debt, negotiate with
creditors, and create a sustainable plan to pay off what they owe. This support can
alleviate the stress of debt and provide a clear path towards financial recovery.

2.3.4 Building an Emergency Fund

 Perceived Behavioral Control: Strengthening individuals' belief that they can set
aside a small portion of their income for an emergency fund can help them cope with
unexpected financial situations. Building an emergency fund provides a financial
safety net that can prevent a minor setback from becoming a major crisis.
 Implementation: Automatic savings programs that divert a portion of income to an
emergency fund account can make this process easier and require less personal
discipline. By automating savings, individuals can consistently build their emergency
funds without having to think about it constantly. This approach ensures that money is
set aside regularly, helping to build a financial cushion over time.
 CHAPTER III
CONCLUSION
3.1 Conclusion
Effective financial management is crucial for individuals, businesses, and
governments. By understanding and implementing sound financial principles, individuals can
achieve financial stability, businesses can ensure sustained growth, and governments can
maintain economic health. The research highlights the significance of financial education,
planning, and discipline in avoiding personal financial crises. By addressing uncontrolled
spending, enhancing financial literacy, managing debt, and building emergency funds,
individuals can secure their financial future and achieve their goals. Promoting financial
literacy and practical financial management tools can foster a financially responsible society,
capable of making informed decisions and achieving long-term financial success.
References:

Ajzen, I. (1991). The theory of planned behavior. In Organizational Behavior and Human
Decision Processes (Vol. 50, Issue 2). https://doi.org/10.1016/0749-5978(91)90020-T

Sukenti, S. (2023). Financial Management Concepts: A Review. Journal of Contemporary

Administration and Management (ADMAN), 1(1), 13–16.
https://doi.org/10.61100/adman.v1i1.4