Avoid these common Credit Card Debt Traps!
It is safe to say that the overwhelming majority of Americans do not set out to get into serious credit card debt. The majority of people work honest jobs, pay their bills on time and use their cards to pamper themselves or to buy luxury items that they couldn’t afford as quickly. While there is nothing inherently wrong with this idea, assuming you can make more than minimum payments on your card(s) every month, it is when this sense of entitlement gets out of control and your earning power can’t keep up that you have a problem. Let’s take a look at some of the most common credit card debt traps out there and see if you can avoid them on your way to a happy, productive life.
The number one cause of credit card debt is related to people’s inability to adjust their living style and spending habits when their income situation changes. They say that the average person has 7 jobs in their lifetime, so the idea of people picking a career when they are 18 and working through it until they are 65 isn’t accurate anymore. The credit problems arise when people go from a job that pays well that they may not enjoy to a job that pays significantly less that they might enjoy more and their spending habits and lifestyle doesn’t adjust to the new financial reality. It sounds complicated, but it happens to thousands of Americans every day. Part of the problem here is that people don’t set a budget and stick to it, and then adjust their budget once their income changes. Remember, your lifestyle is never static, it changes, and you need to be able to change along with it.
The single biggest financial problem facing Americans today is the impact felt after a divorce. Perhaps no voluntary choice an adult can make, apart from quitting your job and living like a hermit, impacts you more than filing for divorce. Even if the split it amicable, most couples are now duel wage earners so you are losing a major source of income. And when you combine a divorce with the reason stated above about how people have trouble adjusting to a different financial reality, credit cards can get maxxed out in a hurry. If your divorce is bitter, it can be financially devastating. Not only do people end up living off of their credit cards, often times, that isn’t even enough. It is impossible to advise people to simply avoid divorce and their credit card debt will be fine, but be warned that the biggest impact of your choice to split may be felt on your credit report.
The third reason is, by far, the most frustrating and the easiest to prevent. Simple money management problems that can seem innocent on the surface can turn into a huge source of credit card debt, that, left untreated, can turn into life long credit problems. The solution is simple, make a budget and stick to it. It sounds easy, and it is. Simply make an easy to follow graph that shows your money coming in and your money going out. Look to see if you can tighten your belt anywhere and send that extra money every month to your credit cards. Problem solved.
The next reason leads the league in making people feel helpless and depressed. It is the absolute epidemic of people with college and university degrees, or, at the very least, highly specialized training, that are stuck working at low paying, customer service (or similar) jobs across the country. While not working up to your potential is no excuse for getting yourself in serious credit card debt, it is human nature to want to live beyond your means when you are sure that your big career break is right around the corner. It may be tough, it may be unfair and it may make you angry, but you must live within your current means until things get better, otherwise, things could get much, much worse.
Battling a gambling addiction is also a huge cause of credit card debt, and much like many of these other reasons, it is completely and totally preventable with the proper help. Unlike divorce or underemployment, gambling can be an addiction that appears to be uncontrollable. Most major casinos now have special machines to help facilitate people getting cash from their credit cards so it can be spent in a casino. Serious credit card debt can really be tied to any uncontrollable addiction, it is just that gambling is the most common. An addiction to drugs, gambling or anything else can spell disaster for you financially.
One of the most tragic causes of serious credit card debt, debt so bad it usually leads to bankruptcy, is a medical emergency. This can be anything from an unfortunate car accident to a diagnosis of cancer followed by months or even years of costly treatments and hospitalization. That’s why it is such a good idea to invest in the right health insurance and even credit card insurance that will pay your credit cards for you if you should happen to end up jobless. There are very few things that can tap your financial resources like prolonged sickness. But with proper planning, savings and insurance, you can put yourself in the best position possible to deal with it if it happens.
Going hand in hand with the ideas outlined above is the simple need to save. In this day and age where people want the best things in life now, not later, and the instant gratification of our needs has become almost epidemic, trying to teach your teenager the importance of saving can be like banging your head against the wall. But the simplest way to make sure you don’t ever have to live off of your credit cards, and therefore ruining your credit, is to make sure that you have a savings pad in place in case something goes wrong. It can be a tough lesson to teach, but it can really pay off in the future.
If you are married and due to the hours you work or if it is something as simple as the two of you growing apart over the years, basic communication over money matters is key to staving off credit card debt. Most couples have their finances entwined, so when one person messes up, both people suffer. The best way to stay out of credit card debt as a married couple is to keep the line of communications open so you know how much has been spent and for what every single month.