It’s never a good thing, nor is it fun, but debt happens. According to NerdWallet, the average U.S. household has a credit card debt of $15,863, an average mortgage debt of $156,584, and an average student loan debt of $33,090.
Although debt is an extremely pervasive problem nowadays, the reasons people have so much debt differ depending on the situation. Some causes, however, are more common than others.
Less Income. – People are making less money nowadays, and they’re afraid of losing what income they can bring in. As of 2013, more than six out of 10 workers say they fear losing their jobs.
Divorce. – Divorce isn’t cheap. Although it varies from case to case, divorce typically costs between $15,000 and $20,000 on average. Although fewer people are getting divorced nowadays, there are still many unhappy people calling it quits, and consequently diving into debt.
Poor Financial Management. – A lot of people live paycheck to paycheck, and can’t seem to scrape up any savings. As a result, more than 60% of Americans don’t have enough savings to cover unexpected expenses.
Unemployment. – Unemployment typically allows a person to collect benefits for a maximum of 26 weeks. Unfortunately, times are tough. Finding a job is hard, and usually takes longer than the four and a half months covered by unemployment.
Gambling. – A lot of Americans don’t know when to hold ‘em, and when to fold ‘em. In 2013, U.S. gamblers lost a staggering $119 billion.
Unexpected Medical Expenses. – No one ever plans on getting sick, and when they do, they lose out big time. The average American has about $1,766 in overdue medical debt.
No Savings. – The easiest way to avoid debt is to save up to three to six months’ worth of living expenditures. However, many people can’t afford to put enough away.
Miscommunication. – Believe it or not, one of the reasons why many are in debt is because they failed to talk about finances with their spouses. In one survey, about 18% say money is a taboo topic in their household, while another 36% say talking about money makes them uncomfortable.
Spending Money That’s Not There. – People sometimes have to live beyond their means, which is why the average American’s credit card debt is over $15,000.
Financial Illiteracy. – The simplest reason why so many Americans are in debt is because they just don’t know how to manage their money. Millions of people lack basic financial literacy. They don’t understand how finances, savings, retirement, and investments work.
Things don’t have to be this way, though. If you have any questions about combating debt, feel free to share in the comments.