Debt is a nightmare, and it affects countless people across the world. People fall into debt, typically because they spend more than they can afford. There are plenty of mistakes that you can make that could plunge you down into a debt spiral. Once you’re there, it’s difficult to get out, so it’s best to avoid the debt in the first place. This isn’t always possible and certain situations will cripple your finances. That said, there are ways to make it less likely that serious levels of debt will become an issue.
Plastic Is Not Fantastic
It’s so easy to misunderstand credit cards. When you hold one in your hand or have one in your wallet, you might think that the money on it belongs to you. The key is in the name, credit. You don’t have the money you’re using. Instead, you’re borrowing it, and you do need to pay it back. Using credit cards alone isn’t all that dangerous. Sure, it’s not the best idea in the world. But at the same time, if you pay back what you owe regularly, it may not result in debt. You just need to keep on top of repayments. The problem is that most people don’t. Instead, the amount they owe builds up until it is no longer affordable. What are your options when this happens? You can get loans to pay off credit cards. This might sound counterproductive, but it isn’t if the interest is lower on the loan than the credit card.
More Money, More Problems
Another issue that people have is spending more than they can afford. This is usually the reason for getting a credit card in the first place. You want to be able to spend over your buying limit. You want a better quality of life. You want the big car, the fancy TV, the nice house and the only way to get it is to borrow money. Again, borrowing money isn’t always going to be a cause of debt. In many ways borrowing money is a built in part of society. If you want a house, you’re going to need to get a mortgage, and that’s just another type of loan. You just have to be careful how much you borrow at one time and always think of the worst case scenario. Where would you be with these debts if you lost your job tomorrow? If you would be in dire straits, it’s best not to borrow at all.
Lenders love to use marketing tactics that make themselves seem like the best solution. An example of this is car financing. Car financing is a way to buy a car when you don’t have the money to buy it at full price. Instead, you can give two hundred dollars per month over a period of four years. Eventually, you’ll pay off the car. Except, you probably won’t get that far because car financing is marketed to people who can’t afford two hundred dollars per month. The car is repossessed and the money already paid isn’t given back. It’s a scam, and it’s this type of ‘deal’ that causes people to fall further into debt.