An estimated 80% of adults in the United States have some kind of debt. So where does it come from, and how do you start to turn yourself into one of the unburdened twenty percent? Unfortunately, finding the answer to isn’t quite as simple as applying a single, universal strategy; fortunately, most debt stems from a few root causes.
Once you’ve identified where you lie on the spectrum, you can find a way to adapt strategies proven successful to your personal spending patterns. So what are these root causes? Read on to discover the most common ways people fall into debt.
Underemployment or Reduced Income
This category can cover quite a few of the common bases that lead to the beginning of overspending. If you’ve never found yourself in financial hardships before but are starting to see the bills coming in each month outstripping your paychecks, this is a likely suspect. The first step to remediation is to identify where the imbalance begins.
Loss or change of employment can quite easily lead to this type of debt accumulation. Few things are more stressful than a change in employment status, and the last thing many people want to do is add to their worries by struggling through the complex world of finances before things have settled down. This procrastination leads to a slippery slope: if budgeted spending isn’t balanced with a new income, money may start draining out of your bank account.
If this situation persists for any length of time, you may find yourself asking how you wound up stripped for cash when you haven’t started spending more. For situations like this, an easy installment loan can help you with your payments, providing stability until the rest of your financials have balanced.
Closely related to the problems found in the first section, overspending is the result of failing to adjust your expenditures to match your income. However, this is generally caused by overlooking the need to calculate a budget altogether.
A common theme here is spending tomorrow’s money—perceived future income—today, a practice often exacerbated by credit card usage. To echo the advice of financial experts everywhere, developing a personalized budget to match your monthly earnings and costs is a requirement, not suggestion, for long-term financial health. You’ll need to track all of your costs for a month, organize the list you end up with by priority—including paying off your debt—and cut everything that goes over your income.
This category covers the large events in life, expected and unexpected. Medical debt is one of the most common unexpected costs, with the average American owing almost $1,800 for healthcare and medical bills. While medical debts are a prominent example, similar expenses can be found any time insurance is overlooked.
Planned expenses can outstrip income and savings as well: paying for a house or education is frequently begun with the intent continuing over the course of years. For these major expenses, a long term loan can resolve seemingly impossible monthly payments into an achievable goal.
Poor communication in shared finances can contribute to both financial and personal hardship. Not only has money been determined to be one of the leading causes of stress in relationships, it is also one of the most overlooked causes of financial difficulty is divorce. If your finances are shared, whether this means splitting the utility bills with a housemate or the house payments with your significant other, it’s strongly recommended financial decisions, with an emphasis on budgeting and major expenses, are mutually agreed upon.
The good news here is that debt doesn’t have to be a permanent thing. No matter what kind of debt you hold, know that it doesn’t have to be difficult to work your way out: once you’ve gritted your teeth through the pain of writing up a new budget and determining where expenditures will need to be cut, you’ll be able to work your balance down in short order.
Getting Financially Stable
If looking at your finances leaves you feeling daunted, there are options to help you. An installment loan can help people in this situation by supplying the money needed to pay off those looming debts that seem too large to work down in their current state. This way, you can consolidate those financial obligations into a single, monthly payment at a set interest rate—much easier to plan into your budget, and no more struggling to calculate where to put any early payments you find yourself able to make.