Excessive debt is the most common source of concern for most people, particularly Baby Boomers, who are trapped in millions of Rands (dollars) of debt and unable to escape, forcing them to work in their later years when they should be retiring or nearing retirement.
This also affects young professionals who are constantly wanting the latest gadget or the latest fad and have never considered saving before they buy any item and they take upon so much debt burden that they cannot even breathe.
Financial issues are one of the leading contributors to divorce and suicide. Most people are provided with many opportunities to increase their debt, but getting out of debt can be very challenging, especially if you do not know what you are doing and have never been taught money management principles and values. Think about all the credit card offers and financing opportunities you’re faced with every day.
There are many factors that create excessive amounts of debt, but the following 7 pitfalls are among the primary culprits:
- Unemployment (pandemic in 2020/2021). The loss of a job forced many people to rely on consumer debt for survival. Most families lack an emergency fund, and credit cards are put into action rapidly just to get over the edge and recognize that it is a short-term solution for a long-term problem.
Many people fall into the habit of doing just enough work to avoid being fired. Put in the time and effort to become an indispensable member of the company.
If you believe that your job is in jeopardy, start looking for a new position or consider starting an online business! Be proactive!
2. Start your emergency fund today. Create a “cushion” for unplanned events that may happen in your life. Start Today and If you already have one, ask yourself if it’s adequate.
3. Lack of self-control. Our society has been conditioned and tends to be a little self-indulgent (an “instant microwave lifestyle”—we want things to happen now) and lacking in discipline. These have largely been responsible for the high levels of personal debt. How many items have you purchased in a moment of weakness and never used the item or taken the time to enjoy it?
Before making a significant purchase, ask yourself if it’s something you need or truly want. If it’s merely something you want, ask yourself if it’s something you would really enjoy owning. Will you use it, do you really need it and will it add value to your life?
Put off significant purchases for a couple of weeks and see if the level of enthusiasm for purchasing still remains. Do you have any use for it that will assist you in adding value to your life?
4. Not having a budget or financial plans or goals. It is not only absurd but downright risky. Good things rarely happen without a plan. It is critical to have a spending plan and financial goals in place so that you can enjoy your life stress-free because you took the time to plan and it did not happen by chance.
Create a budget that supports your financial goals. Develop habits that support your budget. Regularly review your progress toward your goals and your adherence to your spending plan. When it comes time to make major financial decisions, like purchasing an expensive item, ask yourself if this purchase supports your financial goals.
5. Excessive or unwise use of credit. Human beings all have their own ways of self-soothing when in deep pain or their self-esteem is at its lowest. Some people overeat or drink. Others find healthier ways to cope, like exercising. One of the most damaging ways to make yourself feel better is by shopping—retail therapy. It becomes very easy to use a credit card to temporarily improve your mood by buying something that has caught your eye and you do not really need at the time.
But the long-term pain of excessive debt (the price you pay) ultimately replaces that temporary boost. As much as it is so easy to swipe or tap that card, guess what, it is that much more challenging to get rid of a debt burden.
6. Divorce. Not only can you lose half or in some cases all of your possessions and your net worth, but you might also be paying your ex-spouse for years to come. You’re also likely to be stuck with a big attorney bill.
Be careful before jumping into a marriage. Once conflict begins, seek out professional counseling. Consider if your situation warrants a pre-nuptial agreement.
7. Competition with your neighbors, peers, and co-workers Living within your means: Be careful not to get caught up in the hype of wanting to “live above the Jone’s or the Bezos” when you have no idea how they actually generate their income or how much of it they get to keep and spend on exotic, fancy “toys” or expensive items, and then you somehow miraculously think you can also afford it. Stay in your lane and live within your means, it is so much more peaceful and less stressful; do not compete with them and compromise your character for short-term gain.
Getting out of debt is much more appealing and challenging than avoiding it in the first place. Getting out of debt requires time, a plan, and the necessary discipline to stick to the plan. But if you are aware of these 7 primary debt pitfalls, managing debt will be much easier. If you’re already in debt, getting out should be a serious consideration.
Thank you for taking the time to read this blog post. Could you share which factor has affected you the most and that you feel you are drowning and floundering in excessive debt? Share your comment below and if you really need serious help, get in touch and leave your contact details (we will never share your contact details with anyone) and we will engage on how to remedy the situation. We will definitely get in touch and engage. Thank you for gracing us with your presence