Because of the way many economies are set up, consumer debt is a big part of modern life. Crises like recessions and COVID-19 have exacerbated this issue. So much so, in fact, that by the end of 2020, Global debt hit a record $226 trillion.
Getting into debt can be all too easy, but it’s not as simple to get out of. Today, there are many causes of excessive debt taken on by consumers.
This guide is going to look at what some of the most prevalent ones are. Read on for a rundown of the biggest excessive debt causes, along with some suggestions for managing debt.
1. Student Debt
While many governments subsidize education for young people, this isn’t the case in every country. In some countries, the cost of education is so prohibitive that students are forced to take out loans to pay for their higher-level education. These loans often come with exorbitant interest rates.
2. Medical Expenses
Again, there are some countries where healthcare is practically free for all residents and others where patients are forced to pay out of pocket for everything, with costs varying depending on location. If you happen to fall ill (or need to give birth) while living in a country without universal healthcare, you might find ourself saddled with a hefty debt. Medical expenses are a source of great financial stress for many people.
A divorce between two people is an unfortunate thing to happen for many reasons. The emotional toll it takes is compounded by the fact that there are expensive legal fees to deal with and often alimony or child support to pay. Divorce can end up costing in the tens of thousands of dollars, depending on the circumstances.
4. Poor Financial Literacy
Sometimes, debt doesn’t accrue because of one situation or event in a person’s life. Instead, it can happen slowly over time due to a lack of financial literacy. If you don’t know how to budget or control your spending, it’s easy to fall into debt.
5. High Cost of Living
In many areas, the cost of living is on the rise. But salaries aren’t always rising with it. For many, a wage that would have once allowed them to live comfortably is now barely enough to get by.
Debt Management Tips
If you want to get rid of your debt as fast and efficiently as possible, there are some concrete steps you can take. The first will be to better your financial literacy. Teach yourself how to budget and save and even invest.
Next, consider meeting with a professional. A financial expert will be able to advise you on the best way to reduce your debt. You can look at different options, for example, debt counseling vs debt review.
Avoid These Causes of Excessive Debt
It can be difficult and even impossible to avoid some of these common causes of excessive debt. But one thing that can help is to have a rainy day fund in place for when unexpected expenses pop up.
Begin saving for your future today; you’ll thank yourself later! For more friendly financial advice, see the rest of our articles now.