Over 80% of Americans are currently in debt. It is a very stressful experience and one of the people’s biggest concerns. But in order to know how to escape from this situation, you have to understand how it happened and what you can do to avoid it in the future.
Although every situation is unique, some reasons for debt are more common than the other ones.
Too little savings
People don’t save enough money. You should always strive to save as much as you can. It will let you be prepared for unpredicted expenses. According to Nation 21 loans experts, the majority of Americans don’t have even $1000 of savings. If you are prepared for unexpected events, like the loss of a job or illness, the extra money you saved will help you survive the hard times.
Poor money management
Does it happen that you spend more than your income is? If that is true, you should start doing something to avoid it. List all your expenses. If you write down everything that you spend money on, it’ll be easier for you to notice what costs you could avoid. Planning a budget is crucial, and it’ll help you manage your money in a better way.
Health issue expenses
Caring for your health is important. Unfortunately, it’s also expensive. Hospitals and doctors expect people to pay on time, and if they don’t, they use the services of collection agencies. Sadly, if you want to avoid it, you’ll often put the bill on a credit card or take instant loans to dodge the sad consequences.
Divorce
Over 50% of American marriages end with a divorce. If you had to deal with this situation, you clearly know how financially unfriendly it is. You have to split the money with your ex-wife or husband, and on top of that, hiring attorneys is a heavy expense too.
Gambling
Even though people, in general, realize that you can’t win against the house, they are still trying to do it. The urge to win the main prize is strong, but don’t pursue it. Gambling will effect in the loss of all your money, and if you get really addicted, you’ll lose the things that you sacrifice, such as a car, watch, or even home to win back what you lost.
Now the essential question is how to get rid of the debt problem fast. There are several methods.
Use the snowball method
This simple method is surprisingly effective. First, write down a list of all your debts. Start with the smallest ones, and gradually go up to the largest.
While still making minimum payments on all loans, spend all the excess money to pay off the smallest loan. When you get rid of it, use that extra money on the next smallest. Repeat this process, and over time, you won’t have any smaller loans. Because of that, you can focus on starting to pay off the biggest debt, and eventually, you won’t owe any money at all.
Drop expensive habits
If you are always short of money at the end of the month, you should evaluate your expenses and think of removing some of them. Write down every purchase, even the smallest ones. Ask yourself a question – do I really need it? Think if you can minimize some of them.
Try to deny yourself things that bring you pleasure. If you smoke, try to reduce or maybe even quit. That would help your budget significantly. Stop drinking. If you often go to a restaurant, try to cut it down to an absolute minimum. Start cooking at home; it will save you some money too. Basically, remove every spending behavior, that is not necessary, and you will soon feel the difference.
Quick loans
If you have to take a loan, do that, but calculate what is the best option for you. The majority of people assume that a quick loan is something that you should avoid at all costs. However, there are situations where a credit card is simply more expensive, and quick loans will work better for you. You’ll be able to repay them faster.
If you want to borrow a small amount of money, it’s better to use a quick loan, compared to a credit card, because you’ll know the exact charge amount. Do the math, and compare interests to see that it’s a legit, and noteworthy alternative.
Living in debt might be easy and tempting. But eventually, you’ll have to pay for it, and there’s no way to change it. Repayment is a process, and you won’t be able to get rid of all the monthly payments over one night, but if you plan your budget, and spend money wisely, you can overcome the difficulties, and enjoy a debt-free life.
Interesting related article: “What is Debt?“