Top 5 Causes Of Debt
If debt were something tangible it would be a deep, dark pit of quicksand. You take a few missteps and you start sinking in. The more you struggle and try to dig yourself out, the deeper you sink. In an article by ABC News, 35% of people in the United States are facing debt collectors. Oftentimes companies allow an account to go into “delinquent” mode for a couple months. After this delinquent period, they send a debt collector as the last resort to recover that money from you. If you’re progressing towards paying off that debt or you didn’t know that it went into collections, you will have to work with the debt collection company to get that amount settled. Debt consolidation or settlement is a possible route to take in this case.
What gets people all the way to this point? Well there are a number of debt causes, here are the most common.
Reduced income coupled with same expenses. Imagine holding the same job for 15 years. You know your budget each month, have catered your lifestyle around that, and throughout those 15 years have made purchases that can be afforded based on your income over those 15 years. Then you lose your job. You’re able to scramble back to your feet quickly, but your pay took a drastic hit. You try to keep your previous lifestyle and cover much more of that lifestyle in credit.
Divorce. The divorce rate is 50% in the United States. Quite often couples get married young and it doesn’t last or they were too naïve to think it would. A divorce can cost between $15,000 and $20,000 and sometimes more. Who has that amount of money sitting around waiting to be thrown towards legal fees? Not many considering divorce is the 2nd highest causes of debt in America.
Improper personal finance management. Ah yes, budgeting. If there is a word that causes more eyes to roll in the English language, I’d be surprised. Budgets keep us on track. They provide a framework to help guide our spending and help us refrain from overspending or spending excessive amounts of money on ostentatious goods. Many people get into trouble because of refusing to budget. They go out to eat 5 nights a week, buy expensive new cars they can’t afford, and generally spend more than they make. Spending is addictive. We all like having new things and can make habit out of spending money.
Unemployment. You can’t spend money if you don’t make money (well you can to a certain point with credit). If you don’t have a job and regular paycheck coming in each month, you have to hope you nab another job quickly. Until then, you’ll have to start charging on credit. This can become a slippery slope, and for this reason it is advised you compile an emergency fund as a safety net for unforeseen job loss.
Gambling. Easy to start and hard to stop, gambling has become one of the new faces of America. Making matters worse, loans are readily available to help fund a gambling addiction. People think they can gamble their way out of debt, assuming they will win enough money to pay it back. But, as in the quicksand example, the longer you gamble to try and pay off that debt, the deeper and deeper you will sink.
While it’s always easy to say in retrospect that you shouldn’t have gotten into debt in the first place, emphasizing the negative impact of debt now will hopefully lead you to avoid it at all costs into the future. One of the most difficult parts of being in debt is that oftentimes it comes about because of an unexpected turn of events; medical bills, job loss, an unexpected child. As a parting gift, note these 5 tips:
- Do not increase your current debt. Pay it down/off now.
- Budget each of your expenses. Record and track your income/spending.
- Determine amount of each individual debt and the date it must be repaid by.
- Find a supplement source of income. Mow lawns on weekends, take on odd jobs for the neighbors, do a little extra work to help chip away at extra bills or outstanding debt.
- Never lose hope.
Get out there and attack that debt.