Top 7 Reasons Why Most Americans Are In Debt

Everyone has had some experience with debt or knows someone who is in debt. There are some types of debt that are considered good, while some are bad for you. Mortgages are an example of good debt because the property appreciates over time and even if it doesn’t, you can earn of your mortgage by renting out the property. However, other types of debt like credit cards and loans are regarded as debt that is bad because they don’t have any valuable asset attached to them. According to a survey carried out by CreditCards.com, 21% of Americans say they may never be able to pay off all the debt they owe. That number is discouraging and makes us wonder why so many people are in debt in the first place.

Understanding why you are in debt is the first step to managing it and finally eliminating it. Below are 7 top reasons why most Americans are in debt:

1. Your income reduced suddenly – If you suddenly find yourself earning less than normal, then your savings can slowly dwindle before your eyes. Most people start to depend on credit cards and loans to pay the bills and this can be a downhill spiral if you don’t find a way of getting your income back up again.

2. You are not so great at money management – Some of us don’t know how to manage our money. When you are not keeping track of your income and expenditure, you could suddenly find yourself in debt.

3. You may be trying to maintain an expensive lifestyle – Household income varies from home to home, so when next you go on a high-end shopping spree ask yourself if this is the lifestyle for you — based on your income.

4. You don’t have medical insurance – You might be in debt because of medical problems. That is why it is important to have a health coverage. Even when you don’t expect illness, you may find yourself shelling out thousands of dollars on an unexpected medical issue.

5. You don’t have a steady income – Being unemployed is one of the main reasons people get into debt. You may have been downsized or a freelancer, but whatever the case, lack of a steady income, means that you have to rely on credit.

6. You were never taught about credit – Knowledge of financial tools and lingo will help you understand your finances better. Do you understand how phrases like minimum payment affects your credit card? A lot of people don’t realize that a 0% minimum payment does not stop interest from accruing on their credit line.

7. You have no investments – Your financial portfolio can be diversified to include some investments that earn you dividends. With an investment that is safe, you will beat the recession and stay financial-trouble free during economic downturns. For help on investments opportunities, contact us for more information.