Debt can come in many forms, from many sources. A divorce, a death in the family, an unexpected illness, a job loss or just plain overspending can put a strain on your family's finances. However, if you have an understanding of debt, how debt affects your family and you take the time to educate your family members on it, you can manage your family finances and keep debt at bay.
Debt Affects the Entire Family
When a family member is in debt, the entire family is affected. It is usually considered an adult problem, but when mom and dad are arguing about money, the children are most certainly affected. Debt can become the root of marital problems and cause families to break down. In "Making Marriage Last," a publication by the American Academy of Matrimonial Lawyers, financial problems are cited as one of the primary reasons that marriages fail, listed second after poor communication.
Debt Causes Stress
Debt can cause stress in many areas. Debt often puts you directly on collectors' radars, meaning that you get collections calls and letters. It can affect your credit which means that you may not be able to purchase a car or home. It can even prevent you from getting a job or getting approved for an apartment rental. All of these situations breed stress. It can be very stressful dealing with the barriers that debt brings, which can lead to stress-related conditions such as headaches, gastrointestinal upset, insomnia, anxiety and depression. These conditions can result in missed days at work which, in turn result in less income, leading to more debt. It is a vicious cycle.
In a recent survey conducted by the American Psychological Association, 73 percent of Americans cited financial worries as the number one factor that caused them stress. According to group-health.com, a leading cause of chronic stress is financial worries. This leads to approximately 16 days a year of missed work in a quarter of the working American population. Missed work means a decreased paycheck and even possible termination of employment. If there is no income, the family suffers.
Debt Affects Children
A child may not be able to walk up to you and say, "Hey, I am worried about our money situation." However, you can see it in other ways. A child who acts out, gets in trouble at school, gets into fights or seems withdrawn and depressed may be aware of the family debt and is worrying about the family finances.
Education is the Key
The more you know about debt, the better equipped you are to prevent getting in over your head. You don't need to be an accountant, but it does help to understand credit and debt terms such as interest, fixed interest and how that interest can increase depending on your repayment behavior. It is also good to learn all you can about your credit report. Get a copy of your credit report and review it. There are several sites, such as annualcreditreport.com, that allow you to access y0ur credit reports for free. Investigate any questionable activity that shows up and gain an understanding of how credit is reported and why. Solid family finances are built on a good credit score.
A Household Budget Can Help
A household budget can help get your family finances in order and relieve or prevent family debt. When creating a budget, be flexible and realistic. If you actually spend $500 a month in groceries, don't set your grocery budget to $400. When you do that, you are just setting yourself up for failure. By keeping your budget realistic, you have a better chance at sticking with it. Smart budgets keep smart families out of debt.
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