3DebtConsolidation.com would NOT exist if
there were no such thing as consumer debt. Peoples' lives would
be a lot less stressful and we would have less bankruptcies
every year. In this article, we will describe the top 10 causes
of debt that if avoided, will help you live a debt & stress
free life and achieve your American dream.
1) Less Income, More Expenses
It so happens that the main breadwinner of
the household loses his job but monthly expenses are not cut
down in line with the reduction in income. This obviously leads
to a rise in debt. The family is forced to use their credit
cards for groceries, utilities, etc.
2) Saving little or not at
You should save for atleast 4-6 months of
living expenses incase an unfortunate tragedy happens. For example,
if you lose your job on June 1st, you shall have enough money
to maintain your current lifestyle till December 1st of that
year. Until December 1st, you can find yourself new employment
or open your own business. You will often hear the phrase "Pay
Yourself First." Having enough savings for a rainy day
is always a worthwhile investment. Do it and you shall be better
Fees for the divorce attorney, division of
assets between you and your spouse, proceeds given to children,
etc are an easy way to rack up a huge debt. Filing for a divorce
may force you to quit working for sometime which leads to reduction
in income (point #1).
4) Poor Money Management
Poor money management is one of the best reasons
why so many families accumulate lots of debt. Not having a monthly
spending plan and not keeping track of your monthly bills makes
you unaware of where your money is going. You might be spending
hundreds of dollars every month towards items that are useless
and have no value in your life, yet you do not realize it. While
your money is going towards purchasing useless items, you might
also be charging your necessary purchases on your credit card,
forcing you to pay interest on these purchases every month.
To read more about creating a household budget to reduce debt,
read our articles on Do It
Yourself Debt Reduction.
5) Hoping to win the lottery
Most people hope to win the lottery but the
chances of that happening are 0%. Do not spend tomorrow's saved
money today just because you expect a promotion in your job
or are expecting an inheritance from a deceased grandfather.
We all know life is unfair and things can go wrong more easily
than going right.
If you are underemployed meaning you are not
getting enough working hours at your job, you should also cut
down on your lifestyle to match your current income. Forget
about driving a BMW if you are working only 30 hours a week
at the Home Depot making minimum wage. However, if you are a
Financial Controller with a local Corp. then you should think
about driving a BMW. Know what i mean?
7) Big medical expenses
The cost of obtaining cures and medicine in
America is increasing every year. The Federal Government is
cutting down healthcare spending every single year. Almost all
doctors accept credit cards in the USA. While you need treatment
now, you do not have the cash. So what do you do? You use your
credit card because you do not have enough savings in the bank.
8) Financial Ignorance
Important topics such as saving and investing
your personal finances are not taught in school. It's on you
to learn to save for a rainy day, as well as manage your money
so you can own a house over the longer term.
9) Non Financial Communication
Communicate your current financial health
with your spouse and your children and make them aware that
if you cannot afford a certain item, they should not ask for
it. For example, if your 18 year old son wants a new nice hot
sports car, communicate to him that you cannot afford it. Instead,
he should go for a smaller car that gets him from Point A to
B. You and your spouse should promise to each other that you
will not hide your spending habits. One of the most common reasons
why so many couples in the US undergo divorce is because they
rack up huge credit card debts without the other spouse's knowledge.
This then leads to divorce which can help in racking up even
more debt (Point # 3).
Many people put not only their own disposable
income on the line when gambling, they also borrow loans to
gamble! You see, Casinos would
not exist if every one person won money in it. Probably 1 in
every 100 people wins money in the casino over the long term.
Another huge boom in the gambling industry is the emergence
of Party Poker and online gambling websites that are illegal
in the USA. Online gambling is so easy that you don't even have
to step out of your house, you can do it right in your bedroom
with a small PC!