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It’s easy to fall into debt, but how many of us know why we’ve ended up in such a situation in the first place? By recognizing the causes of any problem, we can avoid similar problems in the future, and formulate the best course of action to remedy the situation as quickly as possible. In this article we’re going to explore the six main reasons why people fall into debt, which will hopefully assist debtors to avoid making the same mistakes again in the future.

  1. No Savings: It’s a simple state to find ourselves in, but not having any savings to fall back on can contribute greatly to debt problems. This is primarily a preventative measure as saving while in debt is never a good idea, but having savings in the first place to help cover financially difficult times is always advantageous. Without them, any job-loss or unforeseen expense can force a person into taking out a loan.

  2. No Communication: Most people in debt problems are in a family situation. A major reason that debt becomes an issue is that people do not communicate with their partners effectively. Sometimes it can be out of embarrassment, or even fear that money problems will end a relationship (which usually is not the reality), but keeping money problems from your spouse is never a clever thing to do. By communicating and talking about it you can pull together, helping to fix the issue both financially and emotionally.

  3. Naivety: One of the most glaring issues with debt, is the sheer number of people who do not understand their finances. By not knowing how much money is coming in, how much is going out, or the implications of specific loan agreements, some debtors are in danger of reaching financial meltdown. This is nothing to be embarrassed about, we all have things that we don’t understand. The best thing to do is to either find a friend or family member to explain how finances work, or contact your local citizen’s advice bureau who will help you to understand any financial issue.

  4. Not Adapting: Another issue is when a person or family does not adjust their spending based on the amount of income they have. Often people become accustomed to a level of spending, and do not re-budget when money becomes more scarce. It is a good idea to re-evaluate spending whenever income levels change, in fact, it’s a must.

  5. No Spending Plan: As well as not saving, another glaring omission is when an individual has no spending plan. By closely and clearly defining where money is going and what it is being spent on, an individual can more carefully budget, and make adjustments where necessary. Without a plan, there is no way to be sure that money is being spent efficiently.

  6. Assuming the Best: The last point on our list refers to when an individual believes that there will be a windfall in the future, through which all their financial problems will be solved, and so they do little or nothing to face up to their current situation. This attitude of assuming that everything will work out, is a huge contributor to debt issues. A debtor should take their debt seriously, and do everything they can to solve any problems that they have as soon as possible.

By understanding these 6 common causes of debt, a potential or current debtor will hopefully be able to avoid repeating the same mistakes, or at the very least, will reduce their impact severely.