There was a time when you may have assumed that people who fall into debt do so because they’ve been careless with their finances and haven’t managed their money properly. The truth is that most adults have some sort of debt hanging over them, and while most are in control of their financial situation, for others their debts are spiralling as we speak.
Thankfully you can find advice on bankruptcy via firms like Creditfix, who are dedicated to helping people find their way out of debt permanently. While the idea of bankruptcy may seem like a long way off, you’d be surprised how many people consider this an option every single year. Making yourself familiar with the most common ways people fall into debt could help you keep your finances on track and even help you avoid those devastating financial errors. Read on to find out more.
Job loss and income reduction
It’s rare for any job to come with infinite security – these days jobs aren’t for life. This lack of guaranteed income, potential job losses, redundancies and reduced hours means your living expenses are much more likely to outweigh your income at any given time. Potentially plunging you into debt. The best way to avoid your expenses running out of control is to regularly revisit your budget and adapt it as soon as there is any change to your circumstances. Building an emergency fund as a financial safety net will also help you through any difficult financial periods.
Divorce or separation
Sometimes relationships don’t work out the way we want them to. And when a partner leaves or you decide to divorce, it can leave you in a difficult financial position. Maybe you’re facing a long legal battle with expensive lawyer fees, the divorce settlement doesn’t go in your favor, or maybe you’re left struggling as your incomes are reduced from two to one. Whatever the result, it’s clear that divorce and separation can play havoc with your financial security. Mediation and an amicable separation are preferable however it’s not always possible, downsizing your home and adjusting your budget and lifestyle will help you bounce back.
Poor money management
Sometimes the most common cause of debt is the simplest one. Poor money management. If you don’t know how to handle your money or understand the contracts and financial responsibilities you’re signing up for, then it won’t take much for your debt to spiral out of control. Credit cards, store cards, car repayments, your mortgage, rising bills or even expensive tastes can ruin your credit score and your financial standing if they’re not handled correctly. Reaching out to a financial advisor to discuss your concerns is always a good idea!
And finally, circumstances beyond your control
Whether you’ve been in a car accident, you’ve had an illness or been involved in an accident that wasn’t your fault and as a result, you can no longer work, then you could be left financially stranded. Rising medical bills, insurance costs, treatments, the loss of your income. It’s a worrying time. Reaching out to a personal injury solicitor may help you in these circumstances.
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