Debts, oh debts. These things are more than enough to drive a person crazy! If you are like most people today, you probably have a debt or two on your back. No problem about that as long as the debt was for something important and that you are able to make faithful repayments.
However, the situation becomes problematic and stressful when debts start to reach up to your eyeball. When this happens, you would probably start wondering where all these debts ¬came from. The thing is you should not wait until you are deep in debt before you start wondering about this. In fact, it is important that you know the common causes of debts so that you can do your best to avoid them at all cost. Here are the top five most common causes of debts that you should know about.
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1. Credit Cards
Credit cards are notorious for tempting people to spend beyond what they can afford. Many people are not aware of the various pitfalls that come with using credit cards for daily expenses. It is even worse when you use it for your impulse shopping sprees. Avoiding using credit cards is one of the best ways to keep yourself debt-free and stress-free.
2. Poor Financial Management
Some people just do not realize the importance of proper financial budgeting and expenses recording. A monthly budget is necessary so you can allocate wisely your income among the essential expenditures such as grocery, bills, rent, and so on. Daily recording of expenses, meanwhile, is crucial so you know where your money is going. Debts can result when you spend beyond your income and you make hundreds of dollars of unnecessary expenses, both of which can be avoided with proper financial planning.
3. Unemployment
Loss of job means no more money coming in for the household. This would not be a problem if expenses would stop as well, but they don't. Many people who become unemployed resort to using credit cards for their daily expenses even though they are not sure they are capable of repaying these debts.
When all they can afford to pay is the minimum or when they miss monthly payments, the principal debt just grows bigger and bigger. Debts due to unemployment could be avoided if you are able to save for the rainy day. But if you did not, your best move is to get a new job, fast! And of course, you should also learn to tone down on your extravagant lifestyle.
4. Gambling
Gambling is one of the most addictive forms of entertainment. Some people actually end up using money they don't even have just to keep on playing. This results in piles of debts and loads of stress and anxiety.
5. Little or No Savings
If you have sufficient savings, a job layoff, medical problem, illness, or divorce will not cause havoc in your finances. Not only do you need to start saving, you should also stop spending tomorrow's money. Even if you are so sure about that job bonus or that monetary gift from your aunt, it is never wise to spend money that is not in your hands yet.
If you are already deep in debt, you can make use of financial strategies that can help alleviate your situation. For example, you can make use of debt consolidation loans such as credit card debt consolidation loan or bad credit consolidation loans, among others. Most of these financial schemes are available from banks, lenders, non profit debt consolidation services, and credit unions. But if not, it is best to keep yourself debt-free at all times.
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