Are you feeling crushed by debt? If so, you’re not alone. Some people may have medical, educational, or gambling debt. Unfortunately, people may end up going down a rabbit hole in which they continue the cycle of borrowing and repaying without ever fully being in the black. Read on for insight about how you or others may have gotten stuck in such a cycle.
1. Making Minimum Payments
Do you have credit card debt or other revolving loans? Whether you’re paying off a mortgage or your Visa card, it may feel like you’re never, ever getting things paid down if you’re only making the minimum payment. When you make the minimum payments, you’re not touching the interest, which can continue to balloon up over time. And before you know it, your final balance may be a lot greater than what you initially borrowed. A great way to avoid this situation is to avoid a greater expense than what you can afford to pay back within a short amount of time. When dealing with credit cards, try to pay off the balance in full, or at the very least, make as big of a payment as possible each time you get paid.
2. Not Maintaining an Emergency Fund
Regardless of how responsible you are, emergencies can happen at any time. You may have an unexpected medical bill or a car wreck. Your house may have problems that you weren’t aware of that need to be fixed, such as mold. Natural disasters can strike any part of the country and change people’s lives overnight. With the economy, job losses are still happening with little notice. Or what if something happens to someone you love?
For example, a loved one may end up going to jail for something they may not have done, and need to fight the charges. You could help them by posting bail and helping them plead their case. But what if you don’t have the money to do so? According to How Bail Bonds Work, although you will get a 100% refund for cash bail, many people can’t afford this option, which can often result in poor people sitting in jail for years waiting for trial because they couldn’t post bail.
3. Overspending
There’s nothing wrong with enjoying your life and wanting the finer things possible. When it comes to major life events, you may want to go all out. However, with milestone birthday parties, graduations, and weddings, you should still be careful to spend what you can afford. Did you know that $22,500 is the average amount couples spend for their nuptials? Unfortunately, many people end up spending this even if they don’t have the cash for it. Some people may end up paying off their wedding years after the fact, even after a divorce.
4. Gaining More Debt
If you’re having financial issues, taking on more debt won’t help. Unfortunately, some people take the easy way out with payday loans or by applying for a low-balance credit card. However, these quick fixes can have huge interest rates and fees that will continue to balloon. At some point, you have to pay that money back, even if you don’t have it. If you don’t have the cash to pay off these debts, it’s well within a creditor’s rights to garnish your check for as much as 25% after deductions.
Drowning in debt can be a vicious cycle many people are dealing with. However, all hope isn’t lost if you’re one of those people. Take things one day at a time and assess your financial situation. Don’t be afraid to seek professional advice on how you can straighten out your money problems, pay off your existing cards and loans, and avoid being in the red in the future.
