When it comes to being in debt, some people don’t like to talk about it while others love to complain about it. Here are 6 of the most popular reasons people are in debt:
1. Credit Cards – When it comes to credit cards, you pretty much only learn to control your spending the hard way. That is by racking up the cards and paying the insanely high interest rates. After you do that awhile, you realize that you cannot maintain that lifestyle. You cut back and either get rid of the credit cards altogether or make sure you can pay them in full each month.
2. Student Loans – Student loans are at all time high and student loan defaults are too. When 18 year old kids go to college, they don’t realize that someday, they will have to pay back these loans and that someday comes real soon. Having a $30,000 student loan debt is much less cost in interest payments than a $30,000 credit card bill but student loan debt does not go away with a bankruptcy while the credit card debt does.
3. Buying too much of a house – during certain periods of the bull run of the housing market, you can buy too much of a house and then just refinance it when the equity goes up because of rising prices. The trick is that not everyone can do that at the perfect time. Some buy at the top and then they expect their house to go up in value while they see it go down.
4. Love to shop– Some people just cannot stop shopping. I am lucky that I don’t have that problem because I hate to shop. If you cannot walk by something you think is pretty cool and have to stop and purchase it, then you have a problem.
5. Medical Bills – Just because you have health insurance, many times there is a huge deductible. Doctors and medical people do not like it when you don’t pay them. They will sell your unpaid debt to an experienced bill collector. It’s even worse when you don’t have health insurance because the amount of the bill is higher.
6. Lack of a budget – If you don’t know what your expenses are and match it to your income, then how do you know how much you can spend each month? You also have to budget for emergencies or unforeseen expenses.
There it is, my top 6 reasons people are in debt. You can reach me at george@cahardmoneynow.com where I loan private money on California real estate.