We are all aware that the accumulation of debts limits our freedom. But why are we still incurring debts?
People get into debt for different reasons. Understanding these reasons helps to effectively eliminate or at least be in control of our debts and finances.
1. Unable to
make ends meet.
The current economic condition is making it difficult for you to make ends meet. Salaries are still the same or unable to keep up with skyrocketing prices.
Even with the combined income with your spouse, you are still struggling every month. You are just not making enough money to cover your monthly bills and you are forced to look for ways to pay them.
You start using your credit card to pay for your monthly bills.
You thought you are still in control of the situation because you are able to get by between paycheck. And since you keep using your credit card, the bank kept on increasing your loan limit.
This may seem convenient but it can immediately get out of hand.
The increased credit limit will make you spend more than your income every month. You tend to be only focused on making
But what you didn’t know is that your interest charges grow along with your balance. To make it worse, you are not only using one credit card – you have multiple.
You withdraw cash advance on one card to pay the minimum on another until you realize you can no longer pay and are in deep credit card debt.
2. No monthly budget.
Budgeting is a very simple yet powerful tool to help you see how much you really have and create a plan on what to do with your money on a daily, monthly, and even on a long-term basis.
However, you don’t do it because you think it will just put a limit on how you think you are supposed to enjoy your money.
You are already anticipating that because of the restrictions you won’t be able to stick to it anyway. Or you are just too lazy to do it.
Having no monthly budget means you can easily slide into debt.
True, you can blame the economy, job loss, and other external factors why you are in debt. But you can also blame it on the fact that you don’t budget and spend your money much more than you make.
You gamble as a form of entertainment and recreation but unknowingly, you become addicted to it.
You bet in sports, in casinos, in online gambling sites, at home with friends, and in any
You’ve experienced to win big early on and you think you can keep on getting such wins.
You fail to keep track of your wins and losses because your addiction is spiraling out of control that it does not only involve money but your properties as well. You end up neck deep in debt.
4. No Emergency Fund.
An emergency fund is
Because you encountered unexpected expenses and you have no cushion in place, you cannot overcome the burden of these emergencies.
Since you have no emergency fund to rely on, you ended up in debt to mitigate the costs.
5. You live beyond your means.
You spend more than you earn because you spend too much time on social media and you see your friends living the great life.
You are bombarded with pictures, posts, and stories of their recent trips, new cars, bags, etc. Not only your friends but also the Kardashians, celebrities, and social media influencers you are following.
We are bombarded more than ever by advertisements that we start to feel that we need to keep up with them.
Because you want to be like them and as happy as they seem online, you buy the stuff they have. But since you cannot afford them, you exhausted your savings.
Or maybe bought a new bag you don’t need instead of sticking to your budget, and ultimately used your credit card or take out a personal loan. You end up in debt.
6. Marriage or divorce.
Money and a relationship can be an asset that allows you to achieve more with the help of your partner or spouse. However, if you and your partner are not on the same page on handling and managing your finances, you are entering a very tricky situation.
Married people can separately pay off their respective debts but with marriage comes shared debts.
Couples incur debts during
You are now combining the financial aspect of your life with someone. From the smallest things like budgeting your total income, paying off bills, groceries, to bigger items such as buying a car, a home, starting a business, or taking advantage of investment opportunities.
Laws for dividing assets and debts in divorce vary by state or by country or prenuptial agreement. Regardless, you still need to get an accurate picture of where you stand after the divorce judgement.
There’s mortgage on your home, loans in cars, credit card bills, etc. and sometimes you or spouse is unable to pay the debts in the divorce settlement.
7. Student loans.
You avail of a student loan to help you pay for college and fees associated with getting a diploma such as tuition, books, and living expenses.
Being able to finish college and have that opportunity to earn more than those with a high school education is not a bad way to incur debt.
However, with the easy access to student loans as a young adult you are really not thinking of the big picture and future loan payments plus interest.
You are already in debt by the time you are 18.
There are a lot of ways you can minimize student loan debt such as applying for grants, working part-time to lessen the amount of the loan, go to less expensive schools, or simply cutting costs. But you have not really done any of these.
It is easy to fall into these reasons why people are in debt. If you have multiple debts you will feel overwhelmed and unsure if you can still gain control of your finances. However, there’s a way out of debt.
In order to avoid confusion and combine several debts into a single debt, you can use debt consolidation.
With debt consolidation, you will apply for a new loan to pay off multiple debts. You can combine your credit card debt, student loan debt, auto loan, medical debt, and other types of debt into a single debt and negotiate a more favorable payment term.
With debt consolidation in place, collection agencies will stop contacting you and you will just be focusing your energy on paying one debt. You can inquire for debt consolidation loan with your bank or a credit union.
Debt consolidation will remove the inconvenience of having to pay multiple debts with different payment dates.
This, combined with good spending habits and sticking to a budget will definitely help you get out of debt. It is time to take action and put a stop to the endless cycle of debt now.