Sometimes, the causes of debt problems are beyond your control. We have to be honest about that. Debt does not always result from irresponsible spending habits. There are times when you are just in the midst of a bad phase in your life and your finances are the one that has to suffer for it.
It is possible for life to throw you one problem after another. If it gets too much, your finances just cannot keep up. No matter how careful you are with your financial decisions, there are unexpected expenses that can derail all your financial progress.
What can you do to make sure that these uncontrollable factors will not have too much effect on your life?
The best way to start and protect yourself is by understanding what the causes of debt are. That way, you can learn the signs that will lead to these events. Once you start seeing the signs, you can find a way to prepare for it. By doing that, you can minimize the effects of the debt – specifically to your financial future.
3 causes of debt that you cannot control
If you want to keep debt from ruining your life, you might want to focus on these three causes of debt.
Inflation increases faster than wages
Fortunately, the most recent reports revealed that the latest wage increase matched that of the inflation rate. Of course, we should not put our hopes up just yet. Past trends reveal that the inflation rate is always bigger than the average wage increase. So do not expect that this current statistic will be a regular occurrence.
The next time it is measured, there is a high possibility that the inflation rate will overtake the salary increase for the average American worker. When that happens, people will start to struggle to pay for the things they need around the house. Once this starts happening, it will lead them to borrow money even for the most basic of necessities.
It is not that hard to understand why this is one of the causes of debt among Americans. Remember what happened during the Great Recession? People lost their jobs and had to deal with the rising cost of living without their usual source of income. Most people were already in debt. Things got worse because they could no longer afford their debt payments. Not only that, they were forced to borrow more just to pay for their basic needs. It was quite chaotic.
What is even scarier is the fact that this is not a one-time thing. There is a high possibility that this will happen again. With the way Americans are borrowing right now, it is not impossible. If you are not careful with your debts, you might find yourself without a job and struggling with a lot of debt obligations.
Among the other causes of debt, this is the one that is most devastating. You do not just have to deal with financial difficulties. You also have to deal with illness in the family. The truth is, it is hard to recover from an illness when you are worried about the expenses involved. And with the high cost of medical care in the country, things are bound to be harder for the average American.
According to reports, Americans spend an average of $5,220 per day for a hospital stay in the US. in Australia, the same hospital stay will only cost $765. Imagine the difference! It is no wonder a lot of Americans have a huge amount of medical debt. After all, this is one unexpected expense that you cannot ignore or put aside. If there is a need to rush someone to the hospital, you have to do it. Otherwise, it might cost someone his or her life. You cannot think about the cost when a life is involved.
Of course, you need to face that debt at some point. And once you start working on it, you will feel the stress all over again. You are still recovering from everything and now you have another worry to think about.
The key to dealing with uncontrollable causes of debt
These causes of debt can really make anyone feel stressed. The fact that it is beyond your control makes it a scary reality to deal with. However, that does not really mean you cannot do something about it. While it may be hard to stop these from happening, there are ways to prepare for it. That way, when it does happen, you will not be completely devastated by its effects.
And no, that does not just mean you need to earn more. Even if you are a minimum wage earner, it is possible to make your financial position more secure.
Here are some things that you need to do.
Prepare an emergency fund
Start by giving your emergency fund a boost. When there are signs that your finances are in danger, you should aggressively save to add more to your emergency fund. This will really come in handy especially when you lose your job or someone gets sick in the family. If you have this fund, try to add more to it. You can invest some of it so the money will grow through compound interest.
Deal with debt immediately
It is also important to deal with your debt situation immediately. Even if you had no control over the causes of debt, that does not mean you should not pay it off. You need to find a debt solution that will help you keep your debts under control. Debt consolidation is one of the effective options that you can use. It will help simplify your multiple debts. That way, you can deal with less stress. Not only that, you can restructure your debts so it will be more affordable.
Finally, you can prepare for the uncontrollable causes of debt if you only educate yourself. Read about the financial habits that you need to learn. Financial management is an important skill that you need to learn if you want to avoid accumulating a lot of debts. Not only that, but it is also important to find out how you can survive the typical causes of debt. Like if you lost your job, what are your options? What can you do to survive it? Or if you have a lot of medical debts, what can you do to pay it all off without being forced into bankruptcy?
When you know your options, you do not have to fear the different causes of debt that can compromise your financial future. You are more in control of the situation and you know that you can survive it no matter what.