Being in debt is a problem no one likes to have. Not only do you have to worry about the total sum that you need to pay back, you are also usually worried about making the payments each week. These payments can really eat away the money we’d like to spend elsewhere, and can lower your quality of life. While we can’t tell you exactly how to avoid becoming in debt, we can tell you some of the most common causes. Hopefully by following this list you can try to avoid some of them and keep yourself from owing too much money.
- Loans – This one is the most obvious. If you borrow money, you are going to have to pay it back. Whether it be for a college education or for a mortgage, borrowing money will put you in debt. We can’t tell you not to borrow money, but we can tell you to be smart about it. Only borrow money when you really have to, and make sure it is for a good cause. Also talk to several different lenders to make sure you are getting the best deal and not overpaying.
- Loss of Income – If you have recently had your income lowered, whether it be from losing your job, or simply working less hours, this can lead to debt if you are not careful. Often times people will have their income lowered but they will not alter their expenses. This leads them to spending more money than they have, and they quickly end up in debt. If your income is lowered for whatever reason, be sure to alter your lifestyle accordingly.
- Divorce – Divorce is a messy business for many reasons. In terms of debt, not only are you losing an entire source of income in most cases (your spouse’s), but you also have to pay legal fees. There could also be a divide of assets, or you could have to pay alimony or child support. This is a very expensive process and often leads people to being in debt.
- Medical Bills – While insurance will cover a large portion of your medical expenses, they don’t always cover all of them. Sometimes you will have other expenses, such as in-home equipment or care, that won’t be covered by your insurance. You can’t not pay for these things, and they are often unplanned for. Most people borrow money for these things and then find themselves in debt. If the medical problems are your own, you may even be finding it hard to work, which only increases your chances of being in debt.
- Credit Card Use – If you don’t use your credit cards in the right way, you can quickly find yourself in debt. People sometimes think of credit cards as free money, and they forget that they have to pay them back. Ideally you should only be using your credit card for things that you can pay for by the end of the month. Spending too much on your card and not paying it all back is not only bad for your credit score, but will also lead to high interest charges and eventually debt. Try not to spend more than seventy percent of your credit card limit, and always pay it back on time.
- Budgeting – Last but not least is simple budgeting problems. If you are not keeping track of your finances, you can find yourself in debt rather easily. Make sure you have written down somewhere all of your incomes and all of your typical expenses. If your expenses are more than your income, you have a problem. Without adjusting this, you’ll soon be borrowing money just to pay for your everyday things. Get this in check as soon as you can to avoid debt.