Reasons we fall into debt
Financial pitfalls occur occasionally, leading some people to fall into debt. This can be frightening and should ideally be avoided. Causes are diverse – they may be social, historical or emotional. It may be helpful to know some of the reasons you fall into the debt trap. This way you can be aware of potential mistakes.
Here are a few common reasons we fall into debt:
Reduced income while expenses remain the same:
Changes in lifestyle or the economy may mean that we have lower income, while expenses stay the same. This may lead to a reliance on credit.
Poor money management or budgeting:
Not having a carefully calculated spending plan can lead to debt. One of the best ways to avoid this is by creating a monthly budget.
Going through a divorce can be quite a costly experience. When one party demands too much, the other may be left with hefty attorney fees to settle. Some people need to get personal loans to make it through this difficult period.
It’s easy to become addicted to the idea of “winning big” and striking it rich. Without a proper sense of control, or an addiction, it may be easy to fall into a debt trap.
Having a medical aid can be quite costly. When medical emergencies occur, they may be at the most unexpected times. Expensive treatments may lead one to fall into debt very easily. Nowadays individuals may also get medical loans to cover expenses that medical aids won’t cover.
Lack of financial education:
Schools have an important role to play in basic financial education. Teaching young people financial management skills may better equip them for adulthood and the realities of financial consequences.
Retrenchment, unemployment or retirement:
Planned unemployment (retrenchment) forces one to make adjustments to financial behaviour. Likewise, unexpected unemployment (retrenchment) forces one to make financial changes and spending habits so that finances are sustainable. Claiming from the Unemployment insurance Fund may make this process smoother.
Poor saving habits:
Today’s environment is mainly characterised by instant gratification, so many people fail to save adequately. Saving for the future is often overlooked.