How Did We Debt Here? The Causes Of Bad Finances

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Did you know that more than half of the population of the US is in debt? Well, nerdwallet.com has some pretty disturbing statistics when it comes to families’ finances. For example, the average family pays back over $1,000 in interest payments each year. And, the average debt for an American family is $130,000.

So, what is the point of these stats, aside from trying to scare you to death? It’s to show that debt isn’t uncommon. However, just because it happens doesn’t mean it’s a good thing. If anything, being in the red is something every family wants to avoid at all costs.

To do that, you have to be aware of the cause. Underneath are the main reasons households take on so much debt.

Poor Money Management

If a stranger on the street asked how much you earned and spent per year, the answer wouldn’t be instantaneous. The majority of people think this is too much to ask, yet it’s a standard requirement of keeping your finances in the black. Sadly, far too many families are not aware of their earnings or expenditures. And, if they are, it is only a short or passing understanding. Without a detailed budget, it is almost impossible to keep a tight grip on your bank balance. If you don’t know where to start, you should check out learnvest.com. Their guide will walk you through the process.

Mishandling Credit Cards

Every self-respecting family has a credit card. In fact, cnbc.com says the average amount of debt is $16,000, so you might have more. A rectangular piece of plastic is a handy tool to have. Not only does it help spread out big payments, but it also provides an extra source of capital. For families, a contingency plan is essential. However, it is easy to make fundamental errors, such as not paying off the balance each month. Lots of families don’t take advice from offers.creditcard either. In their opinion, a person has to choose a card with features that are tailor made. For example, 0% APR if you don’t have the money in your account.

Unwilling To Sacrifice

It goes without saying, but managing your finances means making sacrifices. Yes, everyone would love a huge house with a garden, but it’s not possible. We would all like to fill the house with beautiful things and order cable, too. However, these things are only realistic if you have a budget which allows you to spend the money. Seen as a beautiful house and all the trimmings is more than the average yearly wage, most people don’t have the cash. As such, you have to be willing to forfeit nice things in the short-term to get them in the long-term. Everything from living in the same property to keeping the same car is a sacrifice you have to make. Otherwise, the costs add up and destroy a family’s finances.

These are the three leading causes of bad finances. If you treat them with respect, your budget should stay intact.