Many situations can lead an individual into debt, but often it’s a combination of circumstances which truly lead a person into financial turmoil. The best way to avoid succumbing to debt is to be informed about certain occurrences and behaviors that commonly serve as a gateway to money problems. We’ve outlined some well-known causes of debt, as well as some of the less talked about factors involved, in hopes that this knowledge will decrease our readers’ chances of facing this in the future.
The Obvious Causes
- Misuse of credit. One of the primary reasons people go into debt is due to an irresponsible use of credit. Credit cards can be an excellent means of building a strong credit score and purchasing items that one needs — but only within reason. Borrowers who aren’t educated enough about the dangers of misusing credit, typically keep swiping their cards until it’s too late.
- Medical expenses. One of the most common costly emergencies is a medical crisis. The threat of debt related to such an event is understandably much higher for those who are uninsured, but even people with health insurance can face hefty payments from medical treatments.
- Student loans. Student loans are quickly working their way up the list of leading causes of financial problem, with the latest statistics from MarketWatch showing the nation’s student debt rising $2,726 every second. As a result, these loans have become a major financial hurdle for graduates to overcome, especially for millennials.
- Lack of savings. Not having enough money in the bank can quickly cause problems in the event of an unexpected expense. Something as minor as car trouble can force a person to take out a loan with a costly repayment plan or seek out additional forms of credit, paving the way for a debt-ridden future.
- Job loss or reduced income. Unemployment rates may be down, but that doesn’t mean the threat of losing one’s job is gone. In the event that a person’s wages are cut or a job is lost, debt is often right around the corner.
The Silent Killers
- Overspending. Sure, this one might seem obvious, but many would be surprised at the number of people who are unaware of how dangerous their spending habits are. Without a budget in place (or without sticking to said budget), it is likely that debt will become a problem sooner rather than later.
- Inflation. Here’s a dangerous combination: the cost of living goes up, income stays the same and spending isn’t reduced. The act of spending more than is brought in is becoming more and more prevalent, and can easily lead one into money issues.
- Identity theft. Identity thieves are always coming up with ingenious ways to steal the financial information of innocent people, leaving the victim to pick up the pieces. Often, this means costly legal fees or worse, having to repay debt that was accumulated by a criminal.
- Financial windfalls. What might seem like a lucky break can often be quite the opposite, especially when a lump sum of money is involved. Lottery winnings and divorce settlements are often mismanaged, leading the recipients into financial distress.
- Divorce. Divorces can easily send both parties into debt from attorney’s fees alone. Even a separation can cause financial troubles, resulting from the loss of additional income.
Debt is a major problem facing Americans today, so the more educated you become the better. Debt invites in a slew of other problems, like foreclosure and bankruptcy, so it’s important to consult a Miami debt defense attorney at the first sign of trouble. If you’ve accumulated debt and creditors have started to disrupt your life, reach out to the team at Graham Legal today to learn what your rights are and determine an action plan.