Why are you in debt?

Debt can ruin anyone's personal financial situation, especially if it gets out of control and balances reach high levels. Sitting down with a credit counseling agency can help consumers come up with a strategy as to how they will pay down their credit cards and mortgages, but it is also important to determine how they found themselves with a large debt load in the first place. 

Reason No. 1 – Your income was reduced

One of the most common reasons people find themselves building a pile of debt is a reduction in their income. In the past couple of years, the economy has been poor, which might have led many consumers to see their income fall. As a result, credit cards may have been utilized to cover their expenses that didn't drop with their income. Anyone who ends up in this situation should do their best to reduce certain expenses, such as non-essentials like cable television, instead of charging everything to their plastic. 

Reason No. 2 – You were recently divorced

With more than 50 percent of marriages in the U.S. resulting in divorce, many Americans are well aware of the financial difficulties it can cause.

For instance, legal fees can be extremely expensive, and finances are often tied up during divorce proceedings as money is fought over. To help cover essential expenses during this time, people may turn to credit cards, which could lead to a debt problem once the process has been completed. For this, and many other reasons, it is important to always have an emergency cash fund available. 

Reason No. 3 – Your savings account balance is low

Savings are an essential aspect of anyone's financial success, and failing to have any money put away could lead to numerous issues. For example, people who run into an unexpected expense, such as a trip to the emergency room or car repair, will need to have extra money to help pay for these extra costs.

However, those already on a strict budget probably won't have a financial cushion to make this possible, which is why people without savings often find themselves deep in debt after a surprise expense arises. To avoid having to charge a car repair to a credit card, people should consider depositing a percentage of their paycheck into a savings account every pay period. 

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