Finances | What Causes People to Get into Debt?

A lot of the time, when people get into debt, they struggle to identify the causes and thus they have little hope of changing the situation they are in. Debt is obviously a destructive presence in people’s lives, consuming assets, causing mental stress, and damaging our relationships.There are many ways that people try to get out of debt including looking at how to consolidate credit card debt.

But, without understanding the main causes of debt, the problems could easily resurface once again. Here are just a few of them.

Reduced Income

Of course, if your expenses exceed your income, debt is inevitable. But if you have recently experienced a reduced income due to a change in circumstances but you are continuing to live the same lifestyle, something is bound to give. You need to create a budget and plan as soon as possible to deal properly with your reduced income.

Divorce

Divorce statistics still remain high, and this huge change in life circumstance often leads to huge financial strain. Paying for attorneys and dividing up your assets is extremely expensive, so divorce should always be seen as a last resort when all the other options have been exhausted.

Poor Money Management

A lot of the time, getting into debt is simply caused by poor money management. If you don’t currently have a monthly budget, this is something that you need to put into place. Without it, you will never be able to properly track your expenses. Writing down your spending can tell you a lot about your financial habits and the areas where you need to make changes and adjustments.

Gambling Addiction

Gambling addiction is a problem that affects all kinds of people from the very rich to the very poor. People become obsessed with the idea of ‘winning big’, but generally you end up transferring your money directly to ‘the house’. It can lead to a big vicious circle, so you need to be careful and seek help if you feel like this is something you have a problem with.

Lack of Savings

If you are in a situation in which you have no money set aside for a ‘rainy day’, you should be looking to change this as soon as possible. Ideally, you should be looking to accumulate three to six months of living expenses. This way, you always have that safety net to take care of the unexpected twists and turns that life can take.

Low Level of Financial Understanding

Unfortunately, those who have a particularly low level of financial understanding are the ones who are most likely to get punished for it. Thankfully, the internet has made more resources available than ever before, but it is up to you to educate yourself so that you are ready to deal with the financial twists and turns that are ahead of you.

So, if you closely identify with any of these causes of debt, now is the time to start making changes to get yourself back in the financial driving seat.

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