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Top 5 Causes of Excessive Personal Debt

Excessive debt is the biggest worry of many people. We are provided with many opportunities to increase our debt, but getting out of debt can be especially challenging. Bankruptcy is an option for quickly and easily getting out of debt.

There are many things that create excessive amounts of debt, but the following 5 are among the primary culprits. See if any are surprising to you.

  1. Unemployment. The loss of a job forces many people to rely on consumer debt for survival. Most families lack an emergency fund, and the credit cards are put into action rapidly. It’s hard to pay them back when you don’t have a regular income.
  • Start your emergency fund today. If you already have one, ask yourself if it’s adequate.
  1. Lack of sufficient insurance. Could you pay for an expensive medical issue if one popped up tomorrow? Most of us couldn’t, and that’s why we have insurance. Lack of sufficient medical, home, or car insurance causes many people to get into debt when they have an unanticipated disaster.
    • If you don’t have insurance, start researching and get insured quickly. You never know when you may need it.
  2. Divorce. Not only can you lose half of your possessions and your net worth, you might be paying your ex-spouse for years to come. You’re also likely to be stuck with a big attorney bill.
    • Working things out with your spouse isn’t always possible, but it does cost less money. A prenuptial agreement can also provide you with some financial protection.
  3. Not having a budget. Good things rarely happen without a plan. It’s important to have a spending plan and financial goals. Create a budget that supports your financial goals, and regularly review your progress
    • When you need to make major financial decisions, such as purchasing an expensive item, ask yourself if the purchase supports your financial goals. If it doesn’t, don’t buy it!
  4. Unwise use of credit. We all have our ways of self-soothing when things aren’t going our way. Some people overeat or drink. Others find healthier ways to cope, like exercising. One of the most damaging ways to make yourself feel better is shopping, or “retail therapy.” It becomes very easy to use a credit card to temporarily improve your mood by buying something that has caught your eye.
    • The long-term pain of excessive debt outweighs any temporary boost from a new purchase.

Getting out of debt is much more challenging than avoiding it in the first place. Getting out of debt requires time, professional help, a plan, and discipline. If you can avoid these five primary debt mistakes, staying out of debt will be much easier. If you’re already in debt, getting out will be that much easier too.

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