Dealing with debt can be an incredibly scary and stressful experience, but it’s also a common struggle for many Americans. CNBC recently reported that the average American has $90,460 in overall debt, including credit cards, student debt, mortgages, and personal loans.
You might be asking yourself, “If debt is such a big problem, then why aren’t we all pulling ourselves up by our bootstraps and fixing it?” Unfortunately, getting back on track financially is often much easier said than done, and there are many barriers that keep hard-working individuals drowning in debt. Here are six common reasons you may be unable to regain financial control:
1. Lack of Income
Yes, this one is pretty obvious — debt happens when a person doesn’t have enough money to cover what they owe. An unexpected job loss or sudden pay cut can greatly hurt your ability to cover monthly bills. Even if your income remains intact, you may find yourself in a situation where your cost of living has outpaced your income growth, which can make it even harder to put money towards your debt.
How To Fix It:
- Ask for a raise.
- Update your resume, write some cover letters, and interview for jobs with better pay.
- Start a side hustle.
- Reduce your cost of living.
2. Not Having a Clear Plan
How do you know the state of your finances if your finances aren’t organized? How can you tell you’re headed in the right direction with your money if you don’t have a game plan? If you don’t have a budget or clear, actionable goals to work your way out of debt, you’ll have a harder time making progress.
How To Fix It:
- Create SMART financial goals.
- Run a SWOT analysis on your finances.
- Make and follow a budget.
- Use a debt repayment strategy like the snowball or avalanche method.
- Use a debt payoff worksheet.
- Work with a Consolidation Specialist to create a plan.
3. Lack of Financial Education
Sometimes, the root of your financial woes is a lack of knowledge. This definitely doesn’t mean that indebted people aren’t intelligent — many have simply never received a solid financial education.
If you feel like you’re behind when it comes to money know-how, you’re not alone. In an Investment News poll of financial advisors, 78% strongly agreed that financial literacy is a strong concern in the U.S., but only 4 in 10 of them report having done anything to address the issue.
How To Fix It:
- Take a personal finance course.
- Learn from personal finance influencers.
- Try credit counseling.
- Connect with a Consolidation Specialist.
4. Emergencies and Unexpected Circumstances
The saying “bad things happen to good people” is all too true, and unfortunately, those bad things often come with a hefty bill. Unemployment, illnesses, emergency repairs, accidents, natural disasters, divorces, and deaths aren’t the kinds of things that we actively anticipate. These emergencies and unexpected situations have a tendency to sneak up on us, complicating both our lives and our finances.
There are some precautions we can take to protect us from “worst-case scenarios,” such as building an emergency fund or purchasing insurance. Unfortunately, those safety nets have a limit. Once the funds are spent, most people lean on credit cards or take out a personal loan, which can quickly lead to a huge mountain of debt.
How To Fix It:
- Create an emergency fund.
- Take essential emergency steps.
- Keep medical debt off of your credit cards.
- Avoid taking on more credit.
- Get insured and keep your coverage up-to-date.
5. Only Making Minimum Payments
If money is tight, it can be tempting to only make minimum monthly payments on your debts. While this can help in the short term by keeping creditors off your back for another 30 days, it hardly makes a dent in what you owe and keeps you in debt longer.
Interest can also keep you down — the more time you take to pay off your primary balance, the larger your interest charges will grow. MarketWatch explains this well with an example: a $2,000 credit card balance with an 18% annual interest rate can take just over 30 years and cost $4,931 in interest charges if only minimum payments are made.
How To Fix It:
- Make more than minimum payments.
- If you can’t afford to make more than minimum payments, consider other debt consolidation options.
6. Losing Hope
If you’ve accumulated a large amount of debt, trying to overcome it can feel like a never-ending battle. The stress of creditor calls, constant bills, and choosing what bills you can afford to pay may have taken a toll on your mental health. Your debt may also stir up fear, leading you to run away from and ignore it rather than face it head-on.
How To Fix It:
- Know you aren’t alone! Debt is a worldwide problem, but it can be overcome.
- Share your feelings with your partner and get on the same page with money.
- Meet with a financial advisor or a Consolidation Specialist to discuss your options.
- Learn to manage financial stress.
Work Towards a Brighter Financial Future
Debt shouldn’t feel like a life sentence. If you’re struggling to overcome your debt, it may be time to research your relief options and seek help from a financial professional.
Accredited Debt Relief’s Consolidation Specialists have helped match more than 140,000 clients with options that fit their unique needs. Reach out today to learn more and receive your free consultation.
