The debt struggles of Americans seem to never end. This is not surprising because society keeps on urging consumers to spend. A huge part of the US economy relies on consumer spending. That means the more consumers spend, the better it will be for the economy. Businesses gain more profit and employees have a more stable financial position. Companies are able to invest more and pay taxes to the government.
You can see how it is all a win for everyone. Until you consider the amount of debt that consumers accumulate. While there is nothing wrong with spending, it becomes a problem when you abuse it. Since society encourages us to spend, financial institutions have made it easier to access credit. This makes it more vulnerable to abuse. When that happens, debt becomes inevitable.
According to reports, more than half of Millennials have credit card debts. This is a dangerous financial predicament because of the high-interest rate of credit cards. If you do not pay it back, it will quickly accumulate. With all the fees and charges, you will find yourself starting to struggle to pay it off every month. This is why it is important to deal with your debt struggles as early as possible
3 causes of debt struggles in the US
With the total household debt rising by $192 billion to reach $13.86 trillion, it is evident that Americans are still confident with their use of debt. While this confidence may be good for the economy, it might prove to be difficult to keep up with all the payments. This is why getting a debt solution is of great importance.
But if you think that the debt relief program is enough, you are mistaken. You need to do a lot more if you really want to deal with your debt struggles once and for all.
As you pay off your debts, you also need to understand what caused it in the first place. Even if you pay it all off, if you do not identify the reason why you landed in debt, there is a high chance that you will be in the same predicament again. Knowing the source of the problem will keep you from making the same mistakes again.
Here are three of the common reasons why Americans have a neverending struggle with debt.
Living above your means
When you have debt, that is evidence that you have spent beyond your means. After all, if you can pay for it in cash, you wouldn’t have to struggle to pay off your credit card balance. It would have been easier to pay the whole balance when the billing statement arrived because you have the cash on hand. But if you cannot pay for it in cash, that only means you have spent beyond your income.
So if you want to avoid debt struggles in the future, you need to learn how to live below your means. Some people would say that living within your means is enough. It is not. You have to make sure that you have some extra money to improve your financial position. For instance, you can use the extra money to pay off your existing debts or you can use it to save money for emergencies. You can also opt to invest this extra money so it will grow.
Failing to save
Another reason why a lot of Americans have debt struggles is their inability to save. They keep on spending beyond their means without thinking about the importance of saving. When you have savings, it makes your financial position more secure. If something unexpected happens, there is no need to borrow money. You can use the savings to get you out of a tight financial spot.
For instance, if someone has to be brought to the emergency room, they can use this money to pay for the needed treatment. Without their savings, they might have to use their credit cards to pay for it. Instead of focusing on getting better, they have to worry about where they will get the finances to survive the emergency. Even if they use their credit card, it will still give them anxiety issues because of the monthly payments that it will require.
All of these can be avoided if you only make an effort to save more. If you live below your means, it will be easier to set aside some amount for your savings.
Wrong money management skills
Finally, another reason for debt struggles is poor financial management skills. It does not matter if you are earning the minimum wage or you have a 6-figure income. If you do not know how to manage your money wisely, there is a high chance that you will end up with a lot of debts. Most of the time, poor financial management is accompanied by a spending problem. As mentioned, this is how people acquire debt. If you know how to manage your money wisely, you can make smarter financial choices. It will be easier for you to avoid debt.
When you have the right financial management skills, it does not matter how much you earn. Even the limited resources that you have can be used to make yourself financially rich. Soon, you do not have to worry about debt struggles. In fact, you can be more confident in using debt because you know how to use it wisely.
Why use debt consolidation to deal with debt struggles
Now that you know the 3 reasons why Americans are struggling with debts, you need to exert effort to correct it. Make sure it will never put you in danger of having too much debt.
While you are doing that, you should also do something about the existing debts that you owe. Consider using debt consolidation to solve your debt problems. There are a couple of reasons why this is a good idea.
It organizes your debts
First of all, it will help organize your debts. The process of consolidating debts means you have to look at all your credit accounts. You need to analyze all of them to figure out if you can include them in your consolidation efforts. You also have to look at various details like the terms and conditions, interest rate, monthly payment requirement, due dates, etc. As you do this, you get the chance to organize your debts and put them all together. It will also give you insight on how much debt you really owe – and how grave the situation is.
It simplifies payments
When you consolidate debts, it will make your payments bearable because it is now more simple. You will combine multiple debts into one. That means you do not have to monitor several credit accounts. You only have to remember one due date each month. It will be easier to handle and you will not feel so much stress over it. Sometimes, the multiple credit accounts will make your debts seem worse than it really is.
It ensures debt freedom
Finally, since your debts are easier to monitor and keep up with, debt freedom will be more ensured. The single monthly payment will keep you from missing out on a payment. As you make one payment after another, you are more likely to see progress in your debt consolidation efforts. If you focus on this progress, you will feel the motivation to complete your payments. Soon, you will realize that you are one step away from debt freedom after sending your last payment.