Bankruptcy & Foreclosures

We’ve all heard the old adage that money can’t buy happiness but the fact of the matter is that money is necessity for our survival and a tool that enables us to reach our goals. We incur debt when we need money now but don’t have the resources to draw it together. While it is a given that there are high price items that very few could afford to pay for outright (homes, cars, and education for example) a majority of debt has been linked to impulsive purchases- unnecessary items put on credit cards or financed through personal loans.

One of the unspoken risks of carrying credit cards is that they remove the guilt typically associated with parting with cash. In other words, individuals with overwhelming credit card debt often report that part of the reason for their troubles is that swiping a card through a machine doesn’t feel like spending real money. The unfortunate reality is that it certainly feels like real money required when the bill arrives.

Sometimes a very simple approach to impulsive (or compulsive) spending habits is to dig deep into your own psyche in effort to understand what causes you to splurge. As ridiculous and obvious as it sounds, many simply cannot answer on account of why they continue to purchase unnecessary items with money they don’t have. Studies have confirmed that people are less likely to make spontaneous purchases with cash than they are plastic. If that’s what it takes to keep your spending in check, don’t hesitate to leave the plastic at home.

A good deal of managing your debt is to recognize and understand the causes. The number one cause of overwhelming debt in the United States is poor money management. Fortunately it is also the most easily remedied. By creating a spending plan or a budget, it becomes much easier to track spending and take control of money management. But what about the other leading causes of out-of-control debt?

Reduced Income or underemployment can also be a leading cause. This is a situation where you are forced to take a cut in pay or to work fewer hours while outgoing bills remain the same. These are situations where taking extra precautions are critical.

Divorce and gambling addiction are also leading causes of debt. As are medical expenses, unexpected injuries or illness. The solution is to save as much as possible. Set aside enough to pay all of your expenses for three to six months should something unexpectedly keep you from being able to work.

In my job, I witness individuals on a nearly daily basis who simply do not understand how the flow of money works. It is important to get a firm grasp on concepts such as interest rates and return on investments. The economy is constantly fluctuating and can impact each of us individually. While everyone isn’t expected to read the Wall Street Journal for fun, it isn’t a bad idea to get into the habit of understanding how oil prices, the stock market, and foreign policy can impact interest rates on the money we borrow and the interest our money earns.