Getting into debt can be pretty straightforward, and getting out can be difficult. Check these five reasons you may still be in debt.
Getting out of debt is difficult, especially if you carry large balances on high-interest loans or credit cards. Even if you are gaining some ground on paying down debts, you may still be frustrated by the ever-slow pace of repayment, which could lead to actions that may counter your efforts.
If you are in a debt spiral, the initial step in finding your way out is identifying and addressing the root of the problem. Below are the five (5) common reasons you may still be stuck in debt and the steps you can take to start fabricating your way out.
5 Common Reasons You May Be Plunge In Debt
1. You are Only Making the Minimum Payment. Paying only the minimum balance on your credit card each month will protect your payment history from destruction, but it is an expensive alternative. Carrying a balance every month means incurring interest charges on your outstanding balance and on all your new purchases. That is because if you carry a balance, you lose your credit card’s grace period. Your minimum payments may mostly go toward brawling interest charges rather than atoning down your balance.
2. You are Not Using a Budget. With a budget, it is easier to keep track of your spending and avoid falling into debt. Not only does a budget help you avert spending too much to avoid debt in the first place, but when you are already shouldering debt, a budget can aid you in getting out. By creating a budget, you can pinpoint areas where you are overspending and direct more funds toward your goal of paying off debt.
3. You Tend to Make Impulse Overspend or Purchases. If you overspend more than you earn, taking on debt is inevitable. The solution is to stick to a budget and differentiate your needs from your wants. You may be overspending on retail, dining out more than you can afford to, or living beyond your means. It can be risky to break the habit of overspending, but you can take some simple actions to help.
4. You Have No Emergency Savings. Since financial emergencies can happen anytime, lacking emergency savings is a significant risk factor for ending up in debt. If you are hit with an urgent expense you cannot afford, you may rely on loans or credit cards to get you through. A medical emergency, a hefty car repair bill, or a sudden dip in income can derail your budget and lead you into debt when you do not have the cash. Even as you are actively working to pay your debt, many experts recommend setting aside some money for emergency savings. Putting money into savings while your debt follows interest may be counterintuitive. But if an emergency comes while you repay debt, your hard work could fall apart as you are forced to add more charges to your credit card.
5. You Spend Emotionally. Consuming hard after a stressful week, ordering in when you are feeling down, or even going out for drinks and dinner with friends when you are in the mood to celebrate—emotional spending takes many forms. If you are battered with the urge to overspend when feeling excited or happy, sad or stressed out, you are likely to make emotional purchases. This is not necessarily bad, so long as you spend within your means. But if dynamic spending results in more than you can manage to repay credit card bills, you may need to reconsider when you try to reach for your credit card.
Kick Debt to the Curb
In addition to the five reasons above, you are still in debt because you have yet to develop a specific, actionable plan for how you will get out. Get the ball rolling by making a debt payoff scheme. If you have good credit, consider reducing your interest while paying off your balances. You can also consider contacting The Law Offices Of Ronald E. Stadtmueller to discharge you from your debt. Sometimes situations beyond our control can profoundly impact our earning potential and lead to overwhelming debt. If you cannot pay your bills, consider filing for bankruptcy. Designed to give debtors a fresh start, Chapter 7 bankruptcy gives you and your spouse relief from debts through liquidating your assets. With over thirty years of experience, we at The Law Offices of Ronald E. Stadtmueller can help you file for Chapter 7 San Diego quickly and efficiently. Once you have filed for bankruptcy, creditors must immediately stop collection efforts, including harassing letters and phone calls. Contact us today for a FREE one-hour consultation.
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