Why Are We In Debt?

By on October 25, 2017
Why Are We In Debt?

Debt can have a huge impact on our lives and can cause serious problems if it gets out of hand.

There is a wide range of effective debt solutions available, but we need to be aware of how to avoid being consumed by huge amounts of debt to ensure we don’t need these. This means having a basic understanding of the main causes of debt problems, to ensure we have solutions in place to prevent them.

Read on to discover why many people find themselves in debt and what you can do to ensure you can avoid financial trouble in the future:  

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  1. Reduced Income: For many people, expenses often exceed their income and so should they lose their job for whatever reason – perhaps redundancy or even terminal illness – their current lifestyle may no longer be sustainable. If this sounds like you, then it’s a good idea to create a budget as soon as possible to ensure your money is handled sensibly and all repayments including bills are accounted for. Any disposable income should be moved into a savings account, ready for if your income should reduce at any point.
  2. Divorce: You might have debts with your ex partner or money owed in your name, so during your separation money is likely to be very tight whilst you try and sort out your finances. Try not to ignore these problems – with everything else going on it could be very easy to push these debt problems aside but the sooner you deal with them the easier it will be. If this is something you are struggling with and need some helpful advice, take a look at this guide by the Money Advice Service on how to deal with debt after separation.
  3. Bad Money Management: Poor budgeting can lead to debt. This is why you need a monthly budget to help you track your expenses. Write down what you are spending and you can see exactly where your money is going. This will be the best way for you to learn and cut out some of your unnecessary expenses, helping you avoid debt.
  4. Credit Cards: In the UK alone, we owe £68.5 billion on credit cards, making it one of the most common causes of debt. Charging your purchases to a credit card has been the most preferred payment method for many years now. But people don’t realize how quickly these debt totals can creep up. Unexpected fees and charges are one of the main issues and add to debt already owed, pushing it towards an unsustainable amount. Assigning specific functions to each card is a great idea but only if you are financially stable to handle multiple cards. If not, you’re better of sticking to just one card for emergencies.
  5. Health: If you are facing health problems, then the last thing on your mind will be your finances. However, to try and avoid your money worries building up then try and sort your money situation out as best and as soon as you can. You have legal rights to ask your employer for help and adjustments, this ensures you won’t be losing out on a pay packet each month. If you have a health condition or are disabled, then look into any benefits that you could be entitled to.

All of the above are just a handful of common reasons for why we get ourselves into debt. However, if you develop good budgeting skills and money management you could be on the road to avoiding debt altogether. Spend within your means and take those steps towards financial responsibility. 

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Why Are We In Debt?