7 Reasons People Fall Into Debt and What You Can Do About It

If you are living month to month, you’re certainly not alone. Recent reports show that a large number of people in the UK are doing the same. Many households would struggle to cover an unexpected expense of even a few hundred pounds without borrowing or dipping into what little savings they have. What’s more, only a relatively small portion of people in the UK have enough savings to cover 3-6 months of living costs. These points are simply here to remind you that you’re not facing this situation on your own.

Most people live payday to payday. However, it doesn’t have to be that way. You can break the struggle once you identify the problem. It’s all about living within your means, while also identifying the things that will make your life a little bit easier and happier without breaking the bank.

The very first thing to do if you want to fix your financial struggle is to identify the scope of the problem. There could be one or more major reasons that you’re struggling month to month. Not everyone is struggling due to lack of funds. Some people struggle due to lack of planning and simply overspending. When you figure out your issue, you can correct it.

Here are 8 common reasons for struggling:

Lack of Income

In many cases, money problems do not come from overspending but instead from lack of income. If you’re underemployed, or you simply are not making enough money to live the way you need or want to live, you’ll need to figure out a plan to remedy that situation. You can get a part-time job, freelance part time, or sell off some assets to pay down bills to fix this problem.

Overspending

Some people have enough money on paper, but due to not paying attention to a budget at all they overspend. If you have credit card debt, you may belong to this category. Credit cards can be a great tool but not if you keep any balance on them.

Credit Card Debt

Most credit cards now have 18% or more interest rates, which makes them horrible deals. What’s worse is that some cards have fees too. A family with an income of just £40,000 a year can often end up with thousands in credit card debt over the years, with no way to ever pay them off. £30k worth of credit debt on various cards can easily add up to over £1,000 a month in minimum payments if you’re not careful. Add it all up so you know where you stand. Check your interest rates too.

Too Much House

Did you buy more house than you can afford? This is not unusual in the UK where it’s simple to buy a house without a deposit 95%-100% mortgages, and the interest rates are still reasonable. However, banks often approve you for far more than you can really pay. They’re so focused on the mortgage that they forget the other expenses such as insurance, taxes, and maintenance.

Lack of Savings

Not having emergency funds or savings is expensive. It can cause you to borrow money even from payday loans, which is a trap better avoided. Lack of savings can cost you so much money. You won’t be able to take advantage of deals that come along if you have no savings, nor deal with a minor unexpected expense such as a vehicle breakdown.

Poor Credit Report

You can have poor credit even if you did nothing wrong. Having a low income, no credit cards or loans, or low income and high credit cards even if you pay them religiously each month, can still result in low credit numbers. When you have poor credit, everything costs more – from rent deposits to interest on other loans.

No Financial Plan

Many people who struggle to make ends meet often have no plan at all. The main reason for this is simply overwhelm. It’s just emotional and difficult to put into words how emotionally damaging money issues can be. For this reason, you need a plan.

Once you realise what your issues are, you can set up a plan to combat those problems. Until you know, you can’t do anything. It will take complete and utter honesty from you to yourself and anyone you are relying on to help you to overcome the situation. But you can overcome it if you plan to.

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Mastering your finances is the first step towards achieving financial freedom and realising your dreams. With Quicken by your side, you’re one step closer to financial success!