Debt can be a cancerous presence in your life. It can eat up your resources, cause mental stress and strain your relationships. In 2007, the average American household possessed $9,480 in credit card debt. There are multiple factors that lead people to go into debt. Understanding these reasons for debt can help you to avoid getting yourself in a negative financial situation.
Major Life Changes
Situations that drastically alter people's situations in life can lead to debt. These situations include divorce, death of a spouse, loss of a job and long term disability. Many times individuals go into debt because they no longer have the financial means to pay their bills. Sometimes people don't adjust their spending habits even though their income has changed. This also leads to quick debt.
Financial Inattention
Debt can be the result of inattention to your finances. A budget can help you to track your expenses and evaluate whether you need to make adjustments. When you don't pay attention to your spending habits, you can easily over-spend, which can lead to debt.
Greed and Impatience
Although many people would shy away from calling themselves greedy, the simple fact is that greed leads to debt. The age old problem of matching or exceeding your neighbors' wealth status still exists. People often see something they want and hastily purchase it rather than saving for the item over time and waiting to purchase it when they have enough funds (or refusing to purchase it all together if it is unnecessary).
Communication Difficulties
Just because two people are married doesn't mean that they see eye-to-eye on money matters. Managing a budget for one person can be drastically different than trying to manage a family budget together. If one or both spouses don't communicate properly about what's been purchased or about financial plans for the future, the family's finances can quickly enter the realm of debt.
Lack of Savings
Saving money is one of the surest way to avoid debt. Unexpected events in life are bound to happen. Having money tucked away for these occasions (such as illness or car problems) can prevent you from paying for these services on credit. Some expenses are expected, such as college education or purchasing a vehicle. Using money from savings for these types of expenses will keep you from paying thousands of dollars in interest if you were to borrow the money. The problem with saving is that it requires discipline, which many people have not developed.
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