The Top 5 Reasons that Debt Piles Up
Living with debt is an inescapable feature of modern life. Debt piles up on you if you are not careful. From mortgages to credits cards, you have the undeniable opportunity to enjoy something now and pay for it later. However, all of this opportunity to accumulate debt can be dangerous. With a monthly payment of principal and interest, it is easy enough to see a bad debt load pile up and quickly become unmanageable, which can lead to a bad credit rating or even bankruptcy.
Fortunately, we have been able to identify the top 5 reasons that debt piles up so that you can avoid these common traps and enjoy a life of stress-free and manageable debt.
Poor Spending Habits
It will come as no surprise that the number one reason that people end up with bad debt is poor spending habits. This means that people are losing track of their spending, spending more than they can afford and putting off paying down debts until they become unmanageable.
Illnesses or Accidents
Unfortunately, we most often cannot control when we get sick of having an accident, and these situations can lead to a loss of income and an increase in your cost of living. These unexpected events can throw a wrench in even the best-laid debt management plans and are a leading cause of bad debt piling up.
Divorces are often messy and expensive affairs that lead to the forced liquidation of assets at low prices and poor timing. Many people come out of their divorce with loads of extra debt from the expenses and settlements associated with the split.
Loss of Employment
While there are generous programs in place for people who lose their job, an extended period of unemployment can quickly see the debt load pile up. In addition, many people are forced to take a new job that fails to meet their old level of income, and they are unable to keep pace with their obligations.
Bad Debt Management
There are a lot of ways to be in debt, some better than others. Many people fail to find the best rates they are eligible for or to consolidate loans into simpler payment plans. Having a large number of different debts at different rates makes it more difficult to keep track and stay on top of your debt payments, and higher rates will eat into your income more than is necessary.