Debt can hit you suddenly, or it can creep up on you almost unnoticed over an extended period of time. Simply stated, we get into debt when we spend more than we earn – for whatever reason. We usually tell ourselves we’ll pay it off, we’ll get caught up, and every thing will work out. Then suddenly we find we are in over our heads and can’t see a way out.
Here we look at the ten most common ways that people get into debt.
Credit Cards
The majority of people don’t realize the effects of neglecting credit card payments until they are so deep into debt that they don’t see a way out. One sign of having too much credit card debt is only able to afford minimum payments, and as soon as payment is missed, the problem begins to spiral. Keep up with regular card payments through Direct Debit and try to pay more than the minimum amount.
Living beyond your means
In today’s ‘buy now pay later’ culture, consumers are living beyond their means by running up high credit card bills and spending borrowed money. The outrageous amount of money is generally spent on luxury goods which need time to save up for, such as holidays or the latest ‘must have’! Living within your means is only to spend the money you earn each month in your wage packet.
Burying head in the sand
A recent survey by CallCredit reveals that 60% of UK consumers are unsure exactly how much they owe, while 15% admit to not having a clue at all. There are many ways to find out how much debt you’re in, and in most cases, these are free, such as The Experian Report. This report is shown to creditors when a consumer applies for a loan or credit card.
Rent Arrears
Rent is a priority debt. It is important to keep up regular payments and maintain a record of what you have paid. In a worse case scenario, the landlord can evict you without a court order, depending on the tenancy agreement.
Bills, Bills, Bills
Home is where the heart is! So it is important to make sure all household payments are paid for on time. Missing a payment can seriously result in losing the services, such as electricity, water or gas and then the added costs for re-connecting the service.
No savings
The latest ONS figures suggest that the savings ratio is down to its lowest level at just over 1.1% for the first quarter of 2008. Saving is on the decline because there isn’t enough in the pot at the end of the month, but it’s better to save a little than not to save at all.
Gambling
There are now around 1,700 gambling websites, and with the rise of online gambling sites, it has never been so easy to get addicted to gambling and land into a dangerous amount of debt.
Borrowing money
The first rule when borrowing money – either from a loans company or friends/relatives, is always make sure you can keep up the regular payments and you can afford to pay everything back – including the interest.
Unexpected life events
Such as a relationship breakdown, ill-health or unemployment can cause financial plans to become disrupted resulting in financial hardship.
Lack of financial capability
May result in people signing agreements when they may not have understood the full consequences of doing so.
If you avoid falling foul to any of the points above you can significantly reduce the chance of getting yourself into debt, however, when you do find yourself in financial difficulty, there are companies that can offer quick cash loans to help you get back on your feet.
If your debt is out of hand, stop adding to it. Establish a well-planned budget that allows you to at least pay your minimum payment each month. Many people find it most advantageous to put any and all extra money they’ve earned at the end of the month towards eliminating debt. Focus on finishing off one debt at a time, starting with whichever one is being charged the most interest.
Being stuck in deep debt can be quite disconcerting. Keep in mind that you will probably be able to handle the situation yourself. If you find that you can’t, be sure that you take advantage of the assistance that is offered. If you are in debts, visit our friendly staff at 118 Credit and let us help you solve your debt problems.
