Have you ever thought of why you are in debt? Have you ever scrutinized the reasons behind your debt problems? We know that debt can lead us to disastrous consequences in our lives. It can consume our assets, bring on mental stress and even hurt our relationships. There are multiple factors that compel people into debt, this is because many are not aware of the causes behind it. Although there are effective debt elimination programs like debt consolidation, debt settlement etc, we must be aware of the causes that leads to great financial errors so we can avoid be consumed by debt.
Understand the causes of debt below to make sure that it doesn’t take over your life in the future.
- Reduced Income: Often your expenses exceed your income. If you delay in taking care of handling your life with a lower income then you are sure to start to take on debt. Make sure that you understand your changed income and create a budget and a plan as soon as possible.
- Divorce: More than half of American marriages end up in divorce and with it comes strain on personal finances. The laws in America govern what should be done with a couple’s money during a divorce settlement. When one party demands too much, the other will be forced to go into debt to pay for attorneys as well as what their partner deems necessary as part of the settlement.
- Poor Money Management: Most of the time, poor budgeting invokes debt. You must have a monthly budget. Without a proper budget, you will not be able to track your expenses. If you write down your spending for an entire month you can see exactly where you money ends up. This is the best way to learn where you can cut some unnecessary expenses and help yourself avoid debt.
- Underemployment: People often feel that underemployment is temporary, but it can have a lasting effect on your life, especially if you have to go into debt to make ends meet. If you are underemployed, calculate your expenses and start looking for a second job. This might eliminate your chances of falling in debt.
- Gambling: Is one of the most beloved forms of entertainment for Americans. However in reality, it is just a guaranteed exchange of money from you to “the house”. As loans are easily available today, one becomes easily addicted to the idea of “winning big” and striking it rich. In fact, gambling can easily lead to you effortlessly mortgaging your future to “the house” as you try to win back what you have lost.
- Medical Expenses: Lapsed policies and expensive medical treatments make this one of the easiest ways to fall into debt. Everything to do in the medical realm costs money and usually a lot of it. On top of that doctors and hospitals are becoming more and more impatient with people that don’t pay their bills on time. Because of this they tend to turn in patients that don’t have the money to collection agencies. When you don’t have the money to pay for your doctor visit it can be easy to put the bill on a credit card or even to take a loan out to avoid collections.
- Little Savings: If you want to avoid unwanted debt, try to be prepared for unexpected expenditures by saving some money. If you have decent savings in place you can use it for emergencies like severe illness, a job-loss or divorce without increasing your debt. Believe me, no one ever regrets saving money for emergencies.
The above mentioned causes of debt are very common for Americans and can be easy to fall into. However, if you develop good money management and budgeting skills, you can avoid them. Another thing to remember is that it is important to spend within your means, which will further prevent the reduction of your wealth. By taking prudent steps toward financial responsibility you will can greatly reduce the probability of sinking into and accruing more and more debt.