We all have heard about debt. Well to be precise according to our “Best friend In Need”-Wikipedia, debt means owing money to someone, owed money that is past due or the feeling as if you owe someone something. For example- a debt is what you owe on your car loan or ask a friend for some money to pay your rent. Debt is something that has made a lot of people give up their relationships and lives because they could not repay or settle it. That was the reason debt settlement or debt consolidation came into being.
There are many reasons as to why this happens. The major reasons why people go into debt or get broke or bankrupt are-
1) No set financial goals :-
One of the major reasons why people go into debt is that they don’t have a set financial goal. They don’t know how to spend money and where to spend it. Financial goals are like a starting line for every action you make with your money. Simply, it means when you set financial goals, you guide your future financial decisions which gives you a financial direction, and a sense of purpose. Without them, your financial life will lack accountability.
The ones who go into debt usually lack this. They don’t know how to properly spend their money. It can be avoided by properly setting up some financial goals according to your needs. Setting such small goals, asking yourselves if something is really necessary to spend your money on, all this can make a huge difference.
2) Overspending their money-
Take your money as your pet for example. What usually happens when you take your cat out for a walk and don’t pay them attention? If you don’t pay attention to your cat it might run away and get lost. Be it anywhere, house or garden or roads, we need to pay attention to our pets. Same is with money. If we don’t pay attention as to where we are spending it and why, we might end up spending too much without even noticing. Its also a major cause for people getting into debt. Sometimes just to show off the status, people spend money on things they don’t need and end up overspending . Its such small things which people don’t consider important but they actually are.
Whether it’s at the grocery store, retail stores, or restaurants, you need to keep track of your spending. Otherwise, you will find yourself wondering what happened to all that money you had.
3) No budget-
A major reason why people go into debt is that they don’t have a budget. Without budget, they will not have an idea of where to stop spending. Everyone needs a budget to keep themselves in check and when you don’t, you end up overspending and then debt comes crawling in and you don’t even realize where did it all actually went wrong.
There are many more reasons of why people go into debt-
Lack of knowledge/ poor decisions would include things like buying a house with no money down, buying too much house, loaning money to someone who is unlikely to pay it back, co-signing on a loan for someone who is unlikely to be able to pay it back, taking out a ridiculous amount of student loans to obtain a job that pays peanuts, etc. So often the true financial impact of decisions like that does not hit home until years later. Its noticed that many people tend to spend more than they realize when they pay everything with a credit card, even if they are paying the balance in full. Because they know they have the money (or credit limit), they don’t stop and think before buying, sometimes to make sure it fits the budget. Then the bill comes and it’s more than the expected. The lucky ones can still pay it full and the others just add more debt. And yes to insurance! you may grumble about everything when you pay the bill but you’ll be so glad you did when an emergency strikes.
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