There
are so many people out there looking for advice on dealing with debt and
how to avoid debt. There ways to avoid debt are as simple as looking at
what causes debt.
1. Less income/ same
expenses.
When a reduction in income happens,
it is easy to keep living the same and allow debt to fill the gap. When
changes happen the entire budget must be recalculated to fit the new level
of income.
2. Divorce
Over half of today's marriages will end in divorce. It
can be very expensive and incur
thousands of dollars of
debt. If you aren't divorced, you can see what it's like by selling all of
you assets for $50 bills. Then go out to the roof of a tall building and
compete with your spouse to see who can through the most money off the
fastest. It won't take long.
3. Poor management of
money
Having a budget is necessary. If you
don't have one, how do you know where your money is going? You could be
spending hundreds of dollars each month and still charging things that you
don't need. All you have to do is write down your expenses and income and
subtract to find the difference. Once you make the right decisions on
where you spend your money, you will feel in control.
4. Underemployment
You may feel that you are only in a
temporary situation and that a better job is just around the corner. Okay,
but you still need to get your expenses to match your income. If you
increase your income later, then you can add resume some of your previous
spending.
5. Gambling
One of the fastest growing luxury
spending categories is gambling. You are guaranteed to lose more money
than you will make. Gambling is highly addictive and loans are freely
available. You can even mortgage your house at a casino while under the
influence! Well, this is entertainment at its best.
6. Medical expenses
When you
have a lapse in your insurance or a gap between policies you could pay
dearly. The increasing costs of health insurance are affecting millions of
people. Every doctor's office will take credit cards, and it isn't for
your convenience. The doctor wants to get paid immediately. This means
more debt for you and less for them.
7. Not saving enough
The best way to avoid debt is to prepare for the
unexpected. You should have in savings enough money to pay three to six
months of living expenses. IF you have an illness, job layoff or divorce,
you will not be immediately trying to find a loan to help you get by. If
you pay yourself first, you won't have to pay someone else in interest. No
one has ever said, "I wish I
hadn't saved."
8. Not talking about
money
Your entire family should talk about
finances. Be open and honest with your spouse about your financial goals
and spending. There is always a way to compromise, you just have to be
honest and accountable. You have to know what creditors you each have,
because most likely you are responsible. Many people wake up one day to
find out that their partner has racked up thousands in untold credit card
debt. This often leads to number 2.
9. Banking on
tomorrow
It is so easy to spend what you
don't have yet. When I get that raise, I'll pay off this card or we'll
spend the bonus on this. Job bonuses are never for sure until they are in
your hand. Inheritances are set in stone. Don't spend the money until the
check clears the bank.
10. Financial
ignorance
Most people just don't understand
how money and debt works. You need to know how money grows, how to save
and invest and how to balance your checkbook. Schools don't teach this
vital information, and many of our parents didn't truly understand it
either. You must teach yourself and your children. Financial mistakes can
cost you dearly. Get the knowledge and take control of your financial
future.
