Where and How Debt Becomes a Problem

Uncontrolled debt creates stress and even destroys lives and marriages. Not all debt is bad and when used intelligently can help us. For instance, most people can’t afford to buy a house outright, so home mortgage debt is a way to get into a house, pay it off over time and hopefully build home equity over time.

In this article however we will briefly look at the kind of debt that can cause problems.

First up, are credit cards. Credit cards should only be used for the sake of convenience and not as a way to purchase thing you cannot otherwise afford. A credit card is valuable in that it creates a record of your expenses and the credit card company can help you in financial disputes. Having a credit card handy allows you to not have to carry around a lot of cash and if you want to purchase something online is almost a necessity.

The problem is that people lose sight of what they are spending with credit cards. They get to the end of the month when the bill comes due and they can’t pay it off. They feel better if they are able to pay the minimum balance due but don’t realize that because of the interest rate charged they are getting nowhere in paying off the debt. Over time, they may pay several times over what the item actually cost that they purchased.

Second, buying cars on time payments is a way to get into debt over your head. Car companies and salesman are experts at making your car purchase look like a great financial decision. The truth is, where automobiles are necessity for most of us, they are not good financial purchase. You most cases you are stuck with making a large payment every month for years. While the interest rate may be low, the price of the car is jacked up. If you get a better deal on the car, you may not get the lower interest rate.

Many people have gotten turned upside down on their car payments – meaning that they owe more on the car than it is actually worth. Not a good feeling at all. And what’s worse is when one has to go without a job or there is some other financial setback making it impossible to make the payments. In that case, one might lose their car and all the money they put into it. Save up and pay cash if you can, or at least buy a good used car rather than new.

Third, just buying too much stuff adds up over time and lands a person in heads over heels debt before they know it. We are hit all day long with literally hundreds of advertisements. There is always something new and exciting to buy, or we are just encouraged to keep up with what our neighbors have.

An unwise use of credit cards, car payments and uncontrolled spending are three ways that debt gets the best of people. For your financial sake, spend some time (not money) thinking about how you are faring in each of these areas.

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