Many people can easily pinpoint the reason(s) why they’re in debt, but for others, the source of their money troubles is less clear.
Common reasons for debt include:
Reason #1: Spending Habits
It’s tough to hear, but in some cases, existing debt is exacerbated by poor spending habits. For example, if you know that you have student loan payments and rent each month, but you instead spend the money on something else, you probably aren’t using your money wisely.
While poor spending habits and “living beyond your means” is an issue for many Americans, it should be noted that unlike other factors that contribute to debt, bad habits are fixable.
There are a million and one personal finance advisors, apps, advice columns, and fiduciaries out there who can help you work through your spending habits. Budgeting is a learned skill that many people are never taught, but thankfully, it’s never too late to learn something new. If you find that your spending is putting you further in debt, speak to a fiduciary advisor about ways to curb your bad habits and build healthier ones.
Reason #2: Student Loans
Student loans are a bane on many American’s existence, especially millennials and recent college graduates. More than half of all American students go into debt to pay for college, and the average amount of student loan debt per person is around $37,500.
Getting a degree is important, but it’s far more expensive than it used to be. If you ask your parents or grandparents about what they paid to go to college, you’ll probably be shocked by the amount. In fact, tuition costs have even skyrocketed over the last ten years.
Paying for school with multiple jobs isn’t exactly sustainable or even possible for most students. That’s why so many people turn to student loans for financial help to cover college costs. However, the downside is that loans must be paid back eventually and with interest which adds up quickly over time.
Reason #3: You Don’t Know What You Owe
One of the most common reasons why people are in debt and stay there is because they aren’t sure what they owe. It might sound like a no-brainer but ignoring debt won’t make it go away. However, this is most people’s primary strategy for dealing with money trouble.
It’s best to “bite the bullet” and take a long hard look at the state of your personal finances. You might find that some debts are more easily manageable than you thought, and you might need professional help to manage the rest. The truth is that’s okay. It’s not wrong to ask for help when it comes to debt, and it’s always better to ask early on then to leave it alone until you don’t have another choice.
Bankruptcy is an option for debt relief that allows you to discharge debts, but there is a price to pay for debt discharge. If you can, seek out financial advice early on to prevent having to take drastic measures in the future.
Reason #4: Late Payments
Being late on a payment here or there won’t send you to bankruptcy court, but not paying any bills definitely will. In fact, if you avoid paying certain financial obligations like taxes, you might not qualify for certain kinds of bankruptcy.
The issue with late payments, isn’t necessarily the payment itself but the interest. Most utility companies have late fees or interest payments for late payments that increase over time. They might not include the exact amount of interest on the front page of your contract, but the devil is in the fine print. Keep track of your payments as much as possible to avoid massive amounts of debt from late fees and interest.
Put Your Best Foot Forward
There are a million reasons why people are in debt, but one thing is certain – you don’t have to face it alone. One of the biggest burdens associated with debt is the emotional toil of worrying about your finances. Speaking to a family member, friend, personal finance advisor, and/or an attorney can help relieve the stress of facing the music by yourself. You may also be able to get the guidance you need to pay off what you owe.
For legal help with your debt issues, contact Buchalter Pelphrey Attorneys At Law today.