Debt doesn’t always appear as flashy spending sprees; most often, it is built slowly and silently until it becomes the elephant in the room…that squashes the household. While job loss or medical expenses are well-known reasons for high debt and possible bankruptcy, here are the top eight often overlooked causes of debt:
1. Not Following a Budget –
While most people have budgets, the act of following them is another matter entirely. Having a budget often creates a false sense of security; it’s only in the implementation that debt is avoided. Make a budget and stick to it every month!
2. A Booming Economy –
During a tough economy, many experience lean times and obviously feel frustrated at their lack of spending power. But the real harm often occurs during times of economic growth, when money seems abundant. During these times of unrestrictive spending, many people rack up debts that haunt them when belts must be tightened.
3. Constant Upgrading –
These days, it may feel abnormal to keep a phone or vehicle for longer than a year, but constantly upgrading possessions can really put a dent in one’s finances, by rolling debts into one another until they seem insurmountable.
4. No Waiting –
Previous generations waited much longer to accomplish personal goals, ensuring financial security in the process. When once a person would have saved for a starter home and only later in life upgraded to a larger house, the current culture demands a higher standard of living much earlier in life.
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5. All or Nothing –
It can be easy to fall into the “All or Nothing” trap–if one can’t save $500, why save anything? But even saving $10-$20 a month can create a reserve that will save you during a financial crisis.
6. Temporary Setbacks –
When a financial setback seems only temporary, it is tempting to maintain one’s lifestyle and way of living. But expenses should be reduced at the first sign of tough times, before debt can balloon. It’s called living within your means. If your income decreases, then your spending should decrease with it.
7. The Little Things –
Large expenses can seem overwhelming, but daily indulgences are often what’s clogging up the credit card. Cutting back on little expenditures can make a big dent in debt. Forget about that daily expensive latte, buying bottled water all the time, and the little things that you buy with your credit card because it’s convenient.
8. Lack of Knowledge –
From researching funds to knowing what’s in the checking account, one will always be more aware of potential debts when he or she maintains a view of the overall financial picture often. As the late Thomas Jefferson once stated, “Knowledge is power!”