Debt is one of the biggest, most common problems facing people of all backgrounds throughout the United States. There are plenty of ways people accrue debt, and each of them can be equally destructive. But here are five of the most common reasons people find themselves in debt — which of them can you relate to?
- Poor spending control. Bad money management is the root of almost all financial problems. If you are not in control of your spending, it doesn’t matter how many times you get out of debt, you will find yourself right back in it within just a short time. A spending plan (which is different from a budget, learn more here) is the only way to make sense of what you earn, the effect taxes have on those earnings, how you spend, what you value, how you need to prioritize, and how you need to adjust spending habits to make sure you’re not spending more than you’re making. In addition, a good spending plan will teach you to track these things. If you are trying to manage your money without a spending plan and tracking system, you will never get out of debt.
- Lack of income. If you’re a person who previously had a higher income but had to take a pay cut, lost your job or are in a new, lower-paying position, this can be a particular problem for you. In these situations, it can be difficult to change your lifestyle to accommodate your new income level. Any time pay increases or decreases, it’s important to review your spending plan and make any necessary adjustments.
- Divorce. Divorce rates are relatively high in the United States, and along with a divorce comes legal fees, settlements, property division and lost assets. People who do not have prenuptial agreements might find they are at risk of losing a significant amount of money during a divorce and putting themselves into debt. In addition, divorce often requires the upkeep of two homes, since one of the spouses has moved out and set up a new household. This is another reason divorce is expensive and can lead to greater debt.
- Credit cards. Many people are irresponsible with their credit cards, depending on them far too much for their spending. Never charge more than you’re sure you’ll be able to pay off within a month.
- Not saving. You never know when you’re going to have unexpected illnesses, emergencies, car or home maintenance issues or other expenses arise. Saving money can prepare you for worst-case scenarios as well as give you a nice cushion for retirement. If you are not saving money, or are spending money you had saved on immediate needs instead, you are putting yourself at risk of falling into debt whenever an unexpected expense occurs.
At Money Mastery, we help you get out of ALL debt (mortgage included), repair your credit and be more financially stable moving forward. Contact us today for information about how we can help you.