Why People Get into Debt and How it Can be Avoided
Debt is a common issue in households today, but not everyone got into debt for the same reasons. Sometimes, poor financial choices led to the acquisition of debt. At others, unexpected situations led to challenges that made debt seem like the only option.
However, every one of these debts could actually have been avoided with proper planning. To help show you how, here are some of the top reasons people get into debt and what can be done to avoid it in the future.
Living Beyond Your Means
The most common reason for getting into debt is simply living beyond your means. Any situations where you have to turn to debt to make a purchase happen can potentially qualify, regardless of how big or small. So, if you find yourself turning to credit cards and loans to make purchases on a regular basis, and don’t pay the balance in full every month, you are setting yourself up for debt problems in the future.
The easiest way to avoid this issue is to simply live within your means. This requires that you only spend based on what you actually receive in income. Often, this requires setting a budget to monitor your regular expenses, such as debt repayments, utility costs, and savings, and only spending what remains after. By following that formula, you can avoid debt while still meeting your needs.
A divorce is an expensive venture in and of itself and often leaves both parties reeling financially once the division of debts and assets is complete. While preparing financially for a divorce may not be practical, it is possible to recover. As with living beyond your means, it is critical to set a budget to plan for your expenses first. Then, you can use what remains to manage life’s other necessities.
In cases where your financial obligations outweigh your income, other options may need to be explored. This can include finding methods for increasing income as well as reduce your expenses. In cases where an unmanageable debt load is the cause of financial hardship, then you may need to explore other options like bankruptcy if you qualify.
Regardless of whether you have medical coverage, a large bill from a hospital or doctor can still come your way during medical emergencies. Serious injuries, acute illnesses, and unplanned surgeries all come with high price tags, and insurance will only cover part of the bill.
If you find yourself with a large debt to a medical facility and you don’t have any savings to cover the amount, you do have some other options. First, you may be able to negotiate the remaining amount down with the hospital, or at least spread out repayment over a specific amount of time (often interest-free) until it is fully repaid. Additionally, these debts can be addressed in bankruptcy should a filing otherwise be justified.
Savings is Your Best Defense
Your best defense against debt is having enough in savings to meet your needs. So, if you don’t already have funds going to a savings account, now is the time to get started. Even if you can only send a few dollars a week, every little bit does help. And, in the end, it can be a key to avoiding new debt in the future.
Here Is How to Handle Debt If You Are Struggling Financially
Depending on your financial situation and the level of debt you have, there are numerous ways to tackle debt. You can do it yourself or get professional help if you are at a loss of what to do or where to start. Fortunately, there are numerous free services available in addition to loads of free information on how to get out of debt.
Regardless of which way you go, the key to success is commitment to whichever program or tactic you choose to implement.