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5 Common Reasons for Getting into Debt

By Guest Author

While there are many factors that can contribute to increased personal debt, I want to share with you the top 5 that I have come across.

1. Credit Cards. No surprise here. The fact of the matter is that in today’s world it is often difficult to afford those extras (big or small) on one’s salary. Prices have gone up over the decades with average salaries lagging behind, which is why credit card companies are flourishing. They make buying attractive and lure people in with introductory teaser rates, and before you know it the credit card debts have piled up and you are worse off than before. The rule of thumb here is to not live beyond your means and ONLY use credit cards for emergencies.

2. Getting An Education. I include this reason on the list to show that not all debt is bad. Sometimes it is necessary, even essential to ensure a better quality of life. Spending money on a good high-level education is fundamental in getting off on the right foot in adult life. Sadly, many don’t as the cost can be astronomical. However when you consider that a lot of people plunge thousands of dollars into debt over the nickel and dime acquisition of shiny trinkets that soon lose their lustre, perhaps that same amount could have been spent on self-improvement or education.

3. Not Reading the Fine Print. Here is a great money trap; great for stores that is. I’m sure you’ve seen the ads luring you in with “no interest payments”, “don’t pay until the next millennium” promises. However, as with all things that seem to good to be true, there’s fine print here that can trap you as efficiently as any cage. For instance, these offers are usually limit you to purchasing the item on the store credit card. So what? There’s no interest for X amount of time, right? Wrong. A lot of stores will only let you pay the item off slowly, until the amount begins earning interest. And that interest can be up to 30%! Beware.

4. Impulse Buying. Want a quick easy way to get buried in debt? Go Impulse Shopping. This could be the kiss of death to your credit rating and your peace of mind. Sure, it’s hard these days. The stores have fancy displays with strategic lighting; the ads have convinced you that you must have it NOW. All your friends have already gone into debt getting theirs, so why not join them? My answer – go ahead, but only if you can afford to pay cash for this ‘must-have!’ Otherwise, start saving or forget it.

5. Co-Signing. This is dangerous ground to get on financially. If you’ve run up your own debts, at least you can shoulder the blame and take steps to pay them off while making sure you don’t get into such hot water again. But when you co-sign a loan for a family member or a friend, you are dependent on their ability to control their debts. If they can’t, then you’re on the hook for your own debts AND theirs. Even worse if things go south, it could strain or ruin a relationship.

If your only debt is from your education, then congrats; you’ve done a great thing. My only advice is to make sure the other debt traps don’t keep you indebted to your school loans indefinitely. If you have struggled with credit cards or impulse buying and you don’t feel you have the discipline to stop on your own, then reach out and get some help. If you have co-signed for someone, help them get credit on their own as soon as possible. In this case a secured credit card may be a great option. And now that you have been forewarned; read the fine print :-)

This guest post was written by Andrew Salmon. Andrew is a freelance writer and enjoys writing about finance topics, including how to obtain life insurance quotes in Canada.

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