People get into debt for various reasons. Some reasons are caused by their actions where as some are beyond their control. For instance a loss of job can force you to use your credit card for surviving for a few months or if suddenly a major home repair expense arises when you are jobless. In such cases you will no other option rather than to pull out your credit card.
Whatever the reasons may be, getting in a debt is a nagging headache for everyone, or it can be even more painful. Some of these people come out of this tap and live on low debt or even debt free. However, others might not be so lucky.
If you are unable to lessen your debt balances or if you pay your debt off to be debt-free after many years, we will categorize you as one of the following kinds of people:
People Who need to maintain a status
This is a question you need to ask yourself. Do you feel that you have to buy a certain think for the sole reason that someone else has it? Well, it’s not a very comfortable question to ask yourself but your answer can make you realize why you are can’t avoid debt.
Obviously someone would always be in a higher financial status than you. If you are not that rich and you are trying to compete with others just to look good to them, you will soon end up broke or in debt and this is a never ending cycle.
People who spend beyond their capabilities
Who doesn’t wish to live in a dream home or drive in their dream car? There is no harm in trying to reach the stars. But you should accept that you can have a 6 figure lifestyle on a 5 figure salary no matter what you do. Well, if you are spending money even more than your income, you must be using your credit card for the extra payments and therefore you can’t avoid debt.
People Who want to Live the American Way
Purchasing a car or a house or getting college education normally involves the use of loans. Loans for such purposes are considered justifiable if you pay their bills within the time and don’t let them damage your FICO scores.
But when you use credit cards to buy things that are not very important, it’s just not OK. According to the information on creditcards.com, in US, an average household has $16000 in their credit card debt where at least one card is used.
You will have to change your mind set if you can’t avoid debts. It might be the American way of living but it shouldn’t be yours.
People without a savings account
People who don’t keep their savings account how do they expect to pay for any unexpected or emergency expenses? Almost half the Americans have no savings account to pay for such unplanned expenses. What if they lose their job or face a serious disease with expensive treatment or destroy their car in an accident? Such people can’t avoid debt.
And the people who are living only on their paychecks, only one wrong step can lead them to a serious financial disaster. These are the comments by Justin King who is the American foundation’s federal policy liaison.
If you salary is not able to match the inflation it is hard to live a comfortable life. All the monthly income gets covered in the basic expenses from housing to the health insurance and it doesn’t leave anything to save for future.
Well, you don’t have a control over your income but can’t you lessen your expenses? If you spare only $200 monthly, it would make $2400 yearly as your savings. It’s not a reserve that can last for several months, but it’s a good start.
People Who Don’t evaluate their Budget
When did you evaluate your budge the last time? In fact, do you even keep a budget?
Budget is not an appealing word as it defines your financial restriction. But still you should go with the flow and sit down to make their spending plan on a weekly or monthly basis. But you should have a very clear and defined plan of spending your money otherwise it is very convenient to overspend and this is when credit cards come into action.
Believe it or not, a budget is very beneficial for those who want to manage their finance and stay away from the debt trap. To be a successful person you need to be disciplined and start budgeting.
If you can’t avoid debt, prioritize your expenses and allocate the disposable income towards savings and debt first. This way you will make your financial position better.