Why do people go into debt? Well, over the years I have seen it all, heard it all and lived through most of it! I’ve come up with my list of why people go into debt but realize this list could be much larger. Your debt load depends solely on your own situation as people who have a high debt load are there for their own reasons. I’m not here to say what is right or wrong or to point fingers, rather simply to share the most common reasons that I have come across in my years.
Reasons Why People Go Into Debt
1-Divorce or Separation- When couples split they don’t realize the amount of debt they can incur when dealing with lawyers, real estate agents or spouses debt etc.
Factor in child or spousal support and that can take a big bite out of your pay leaving you short to pay the bills. Keep in mind money is the number one reason couples fight and split up! Rebuilding life and finances after a divorce is possible but like anything is a journey to a destination.
2- No Budget- I’ve said it over and over but a Budget is imperative no matter how much money you make. Some people feel a budget takes too long to do or feel they don’ t know how to tackle starting a budget. It’s important to know that if you are in a relationship in order for a budget to work both parties have to agree to using it. Either way money fights and money problems can arise when the team is missing in teamwork and finance if you are in a relationship.
Some people put their own time and happiness before finances and again this can bite you if you let debt build. An example would be going on a honeymoon that costs $4000 when you are 40k in consumer debt!
There are so many websites on-line that will help you with a budget. Canadian Budget Binder is one of them where we publish a Budgeting Series that will help guide you on your journey.
Tip: If you want to get out of debt or stay away from getting into debt start a Budget today and stick to it!
3-Putting Purchases on Credit Cards- When people go shopping some tend to get emotionally stimulated when they see, touch and feel items and justify why they need them. This type of emotional spending is what sales associates thrive on. If you walk in with the puzzled look or come across as an easy target, guess what?. You will be the sucker of the day! You need to find out why you are filling the void or the hole in your life, so you can stop the emotional spending.
How many people rush out to get the latest Cell phone like the IPhone 5 or the biggest and best 3D Smart TV? Where does most of this end up.. you guessed it- on credit!
Tip-Leave your emotions and impulsive feelings at home male or female. Shopping with emotion will cause you to overspend. I don’t care how orgasmic the product makes you feel, if you don’t have the cash you don’t buy it! Easy Credit+ Minimum Payment= Lots of money and No Sleep!
4 Being Lazy- Just because you make a nice chunk of money doesn’t mean that you can’t get your hands dirty or put a little more sweat into keeping your finances on track. I have mates who hire house cleaners, lawn maintenance (mowing the lawn), grocery shoppers, dog walkers, gardeners etc. Then they complain that they are strapped for cash or in debt up to their eyeballs.
Come on, seriously! A little work goes a long way especially when the money stays in your pocket.
OK, granted some people are busy, and others have physical limitations but for the most part I’m talking about the people who simply blow money when they are fully capable to do it.
These services come at a premium cost and are relatively easy to do on your own. Unless, of course you have so much money that you don’t know what to do with it. Get out there and give it a try, I’ve survived it!
There are plenty of so-called millionaires with little to no Net Worth because they blow it like it’s water. They are no richer or farther ahead than the average person who makes an average salary but saves their money. The same goes for everyone else.. be smart with your money, spend less than you make and save!
5- Loss of job/Injury/Illness/Death- This one is a big one as some people tend to go hog-wild when they get a big raise, or take home a huge salary. They play to fit the role buying the nice car, the big house, boat, cottage you name it!
In an instant this can all be taken away and no matter your income level.
Ask Yourself these questions because for some debt comes because of unexpected emergencies beyond their control.
What would you do if you financed all the big-ticket purchases and you suddenly lost your job?
What if you injured yourself at home or at work and are no longer able to work?
What would you do if a medical emergency happens in your family?
Prepare for these potential situations with an Emergency Savings Fund and not spending more than you earn.
Stay away from keeping your debts so high that if something did happen you would be up the river with no paddle!
Make sure you have all the proper insurance coverage! You never know when you will need it. It’s better to say “Thank Goodness I’m/We’re covered” than to have nothing at all.
6-Immaturity and Ignorance
The last reason some people go into debt is potential ignorance to the fact that they don’t know how to manage their money. They have no idea what they spend and are immature with their money due to lack of knowledge. They worry about finances only when the bill comes in and hope they have the money left from their pay cheque to pay it. Some people don’t ask for help or don’t want help because they don’t think they have a problem and know everything about money management.
These people are most apt to declare bankruptcy or have serious debt!
Tip- Be Open to educate yourself on finances, ask for help and don’t feel ashamed. We are all human and not perfect by any means. There is no such thing as a stupid question. Someone is always willing to help.
Tip- Educate your children at a young age so they grow up understanding finance and money management. Starting to learn at a young age will help your children along the way and could be one of the best lessons you can teach your children.
No matter what your reasons for going into debt, you will pay a high price for not managing your money properly. Take a step in the right direction, never give up and fight debt.
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