Aug 18 2008

Why People Get in Debt, and How to Avoid It

Posted by bpaul in Moolah Ramblings
0 Comments

Let’s face it…Getting into debt is not very good thing. Yet thousands of people do it every day. Why? People fall into the black hole of debt every day because of the thousands of “fantastic”, to-good-to be true deals that are advertised all the time. People believe that they can get tons of money without having to work for it. Credit cards are out there for this exact reason. So how do you avoid going into debt?

First let’s talk about credit cards and how they affect our everyday life. It is remarkably easy to go into debt with a credit card. For people who enjoy shopping, it is especially difficult to avoid the hole. With prices going up, it is getting harder and harder for shoppers to keep a steady budget. When you fail to make a payment at the end of the month you are generally given a grace period, but it still goes on your record. If you start falling behind month after month after month, you start owing a ton of money to the bank. Eventually you get so far down that you won’t be able to pull yourself back up.

So how do you avoid going into debt with credit cards? Don’t use them as much, get debit cards, pay with cash, and only use the credit cards if you really need to. There are other ways to go into debt too, having too high of a mortgage payment, falling behind on any payment will get you landed into serious debt problems. Reasons people do this to themselves is because they don’t have the money to pay for something that they thought they had the money to pay for.

It is really important to watch all your bank accounts, all the money that goes in and out is essential because you need to know what you can and cannot spend. If you keep a tight hold on the money that filters out of your account then you will be able to stay out of debt. It is only when you start to spend money whenever you feel like it, or if you get a raise and you think you can buy more, that you start having a major problem.

One reason so many people are in debt is because what they see, they want, and what they want costs quite a bit of money. Some people will get a raise and then decide to use that money and get a flat screen while their kids are hunting through an empty fridge. People like this tend to spend all their money in one place instead of investing or at least saving it. A lot of people from ages 18 thru 25 have this problem going through college. In their mind they want to pay for things that will impress their friends and they are willing to go into debt to do it.

It is essential to be able to balance your money, and if you can’t do that then you won’t be able to stay out of debt. Try and take control of your spending tendencies. Do you really need that gigantic TV, or that really nice dress? Focus on spending your money in more important places or saving it up for a larger purchase later down the road. Scan the internet, and search for articles that talk about credit counseling, debt consolidation, and any article that talks about staying out of debt. There’s a site I go to frequently called CreditSolutions. They have a great learning section on credit and debt solutions. With these ideas in mind, get started on avoiding debt as much as possible, so you can enjoy the fruits of your labor in the near future.