The following is a guest post. If interested in submitting a guest post, please read my guest posting policy and contact me.
With the current state of the economy, it’s easy to fall into debt and not know how to break free from the cycle. People get into debt for lots of different reasons, but it’s always because of one significant factor. When you spend more money than you make, debt is unavoidable. Of course, there are things that make this more complicated such as credit cards, short-term loans, and bank loans, but the issue is always the same. Below, you will find the top five reasons why people go into debt. This list can help you learn how to avoid debt causing financial decisions, so that you can protect your financial stability.
Unmonitored credit card usage
When you have a credit card, it can be very tempting to charge your purchases instead of taking the money directly out of your bank account. In fact, there is a huge economic benefit to doing this. The economic system rewards you for these types of financial decisions, by raising your credit score and making you more eligible for loans and other types of financial assistance. The downside is that if you do not monitor your credit card usage and responsibly handle this debt, you could very easily become late on your payments. This would make it difficult to get out of debt and you would undoubtedly fall behind on your bills and other financial obligations.
Poor money management skills
Managing money is not something that comes naturally to some people. If you do not manage your finances effectively, you are going to find yourself in debt. You can use tools like Mint.com to get control of your finances and understand where your money is being spent. This is a
critical step to the process and technology like this has made it much easier to control your spending habits.
Short-term loans or payday loans
One of the most popular types of financial assistance today is short-term loans, or otherwise called payday loans. The problem with these loans is that they require a very fast repayment, which is not possible for some of the borrowers. If you are unable to repay your loans on time, you will be forced to take out additional loans or burden the high interest rates of the initial loan for a prolonged period. This can take a significant toll on your finances.
Poor investment decisions
It takes money to make money and once you are able to make investments, you can build wealth at it much quicker rate than you normally can. However, if you make poor investment decisions, these business transactions can go sour and they can come back to hurt your financial stability. You should only invest in things that you know are profitable.
Over burdened by a mortgage
Today, mortgages are what lead many families into economic trouble. If you commit to a mortgage that is beyond your financial capacity, you’re going to find yourself struggling to pay your bills and staying afloat will become a real challenge. New homeowners need to recognize that they don’t need the biggest and the best home to feel good about themselves. Deciding to purchase a home that is well within your financial ability is a responsible decision to make.