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Top 5 Causes of Consumer Debt

September 8, 2008

Hundreds of readers search for causes of consumer debt and how to deal with it. There’s nothing scientific about consumer debt or how to get out of debt. Many will choose debt counseling to help with their debt elimination; some will try debt consolidation and yet many will just bury their heads and wait.

The first step for eliminating your debt is understanding the root causes. Some common causes of consumer debt are:

1. Decrease in Income. Many times we’re caught off guard with a job termination, an on-going emergency, reduced work hours or overtime but we keep the same lifestyle. The sooner you learn to adjust to life’s new reality, whether it be temporary or permanent, the sooner you’ll decrease that debt.

2. Poor Financial Management. Unless you have droves of money and no worries, you need a monthly spending plan. Without a plan, you have no idea where your money is going. You may be spending hundreds of dollars unnecessarily. Your spending plan is no more difficult than writing down any of your expenses and income and integrating the two to see where the money is going. How would you know if someone has been stealing your money if you never check?

3. Divorce. Many marriages fail and bring about a financial tragedy. When you decide to divorce, so does all the money; bank accounts; real estate and anything else of value. For many, bank accounts can be frozen meaning no money coming but the bills will still pile up.

4. Saving too little or nothing at all. The easiest way to avoid unnecessary debt is being prepared for unexpected emergencies by saving three to six months of expenses. With a cushion in place, a job layoff or illness will not immediately cause you financial turmoil and increase your debt.

5. Poor Money Communication Skills. It’s extremely important to communicate with your spouse or significant other about finances. Be realistic with immediate family about what you can and cannot accomplish. Discuss financial goals and spending habits. If you’re a saver and believe in preparing for uncertainties but you’re married to a spender who lives for the moment, you will want to create a strategy for both to get what you want. Become knowledgeable about household and each other’s personal expenditures.

by David Kamau

Written by paydayla · Filed Under Debt Help 

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