Debt Dangers: The Most Common Reasons For Going Into Debt
Do you hear stories about people deep in debt and worry that the same thing could happen to you? Fortunately, there are steps that you can take to avoid debt. By avoiding these common factors that can cause a financial crisis, you can help keep yourself debt-free:
Not Setting a Budget
The biggest reason why people go into debt is because they cannot set a budget and stick to it. Creating a budget allows you to see what you have coming in and what you have going out each month. When you know how much you have to spend, you lower the odds that you overdraw your savings account. It’s also just as important to set a realistic budget. You may think you are overspending until you take a close look at your budget, which may not give you enough to even pay your bills. Know your limits and stick to it with budgets.
Taking Advantage Of Credit Cards
Some people believe that credit cards are nothing more than free cash when you need it. However, that money must be repaid at some point. What’s worse, some people only make the minimum payment each month. With interest, a $20 purchase could easily cost $100 or more by the time it is paid off. Use credits cards to build your credit score, and don’t spend more than you have money for. If it is still a struggle for you, stick to debit cards and cash for a while.
Not Planning Ahead to Repay a Loan
It is common to see people borrowing more than they can afford because they only look at the monthly payment on the loan. By thinking in pure dollars and cents, you can determine how much you can afford to pay back in a reasonable amount of time.
Buying With Emotion
Buying with emotion may cause you to spend more money than you should on a good or service. Whenever you decide to buy something, never spend more than you can afford or opt for extra features that you don’t need. Whether it’s a shirt at the mall or a brand new car, taking a few days to really think about the purchase can help you determine if it is worth it.
Falling for Sales Tactics
Salespeople are trained to make as much money per sale as possible. Even if you don’t need that extra feature or extended warranty, they are going to try to get you to buy it. When you spend your money on things you don’t use or won’t use, that can cause you to go into debt quickly.
A Lack of Financial Literacy
Do you have a hard time understanding concepts such as an interest rate or penalty rate? If not, you could spend your money without much thought for how much it will cost you. If you need help, do your best to take courses or talk to a financial planner today.
Going into debt can be dangerous for yourself and your family. If you are having trouble staying above water financially, talk to a bankruptcy attorney or a financial expert immediately for help.
Informational credit to A C Waring & Associates Inc.
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Category: Debt
