Causes Of Debt: Things You Need To Avoid
Prevention is always better than cure. True enough. When it comes to debt problems, knowing what causes them is very important so you can avoid committing the same mistake. The worst thing that can happen is you filing for bankruptcy. To avoid this from happening, awareness and preparation is needed. Below are the common causes of debt:
Spending more than your income permits. Some people may think that they have their spending under control. But before you make such claim, take out a piece of pen and paper. List down everything you bought or paid for in the previous month. You must include your transportation expenses, groceries, utility bills and personal purchases. Tall all costs and compare it from your monthly income. One of the things you should ask yourself is, "am I guilty of overspending?" You may be surprised to find out that you are spending more than what your earnings allow. Based upon your list, create a new budget plan that will complement your earnings.
Not setting aside for your savings. Have you saved enough funds in your savings account that can support you and your family (if you are the breadwinner) for at least 6 months? According to surveys, a lot of people do not have an emergency fund nor do they have money in their savings account. Credit counselors advice all consumers to save money in case they lose their jobs or face up to other unexpected events.
Not setting a budget. If you do not follow a budget plan, then it is most likely that you are spending more than what your income permits. An efficient budget plan must include monthly bills, debt repayment, insurance, and savings. Be sure to spend your salary on things that are really important or essential. If your monthly earnings is not sufficient to cover for everything, recognize your priorities.
Gambling. Each year, many people become victims of gambling addiction, with no other option left but to file for bankruptcy. NEVER depend on gambling as a means to get money. The best thing to do is to look for a more realistic way to earn money instead of buying the lottery and hope for a miracle.
Not securing an insurance policy. Do you have an insurance policy? Since accidents or emergencies can happen at any time, being insured can protect you from the threat of bad debt. For example, medical bills can instantly put you in a serious debt situation in a matter of days. By signing up for a health insurance, you can count on financial support from your insurance company during times of need.
Not setting priorities. Many consumers are guilty of uncontrolled spending. As merchants introduce latest gadgets, appliances, and new vehicle models in the market, it is easy to get drawn to the hype of advertising. Before you know it, you could be stuck in credit card debt. To avoid financial danger, it is crucial for everyone to realize the value of saving money and that frugality is a true virtue. You should be able to distinguish the difference between what you WANT and what you really NEED.
Copyright (c) 2010 Suzy Vanstrusen
by: Suzy Vanstrusen
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