Serious debt issues can arise when finances are mismanaged. Although there can be a lot of factors that contribute to people’s financial decisions and possibly their debt, however, the following are some of the most common and costly money mistakes that can exacerbate any financial situation – and that may trigger:
- Rapidly snowballing debt
- The need to file for bankruptcy in the future in order to get a financial fresh start.
Avoid Making these Money Mistakes
- Being misled by common spending traps – Spending traps refer to offers that may seem like “deals” but that actually incentivize you to spend money (or more money) than you would have otherwise. Two common examples include “rewards” credit cards and “no interest for X years” loan offers. With such spending traps, people are far more likely to make purchases they cannot necessarily afford (and that they may not even need) – and they can be on the hook paying for such purchases (often at high interest rates) for years.
- Spending too much on housing – Whether buying or renting, housing costs should generally not exceed 1/3 of a person’s income (according to financial experts). Unfortunately, however, people aspiring to be upwardly mobile may end up spending way more of their income on their housing costs, leaving far less to cover their other essential needs. This mistake can lead to serious debt issues if, for instance, even just one other essential and costly expense (like a medical bill) arises, if the individual loses his job/source of income, etc.
- Not having a monthly budget – People who don’t have a clear idea of how much disposable income they have are far more likely to overspend in general.
- Not budgeting for the long term – While having a monthly budget is important, so too is having a longer-term budget – like one that projects out over the course of a year. These longer term budgets tend to be more conservative than short-term budgets, as they tend to include more cushioning while planning for bigger impending expenses, such as property tax bills, IRS tax bills, etc.
- Not investing in their savings accounts – While how money is spent (or not spent) can play a role in people’s overall financial situation, so too can their choices in investments, especially when it comes to savings accounts. In fact, failing to invest in a savings account can be another financial pitfall, as it can mean that there’s no financial safety net to fall back on when bigger expenses arise; and that can result in people having to turn to risky and expense borrowing options (like payday loans, for example).
- Not seeking professional debt relief help when they’ve been in the red for some time – Whether people think they can dig themselves out of debt, they are too proud to seek help or they simply don’t know that help is available, failing to seek it out when debt is out of control is another big mistake, as it can lead to lawsuits from creditors, as well as wage garnishments, repossessions, and possibly even foreclosures.
A Word of Caution: Not All Debt Arises from Money Mistakes
While money mistakes can certainly lead to debt and the need for bankruptcy, it’s important to note that, for many people, other circumstances (such as the following) can lead to money problems and bankruptcy:
- Job loss/persisting unemployment
- Health impairments/ailments that require expensive, ongoing medical care.
Need a Financial Fresh Start? Contact a Denver Bankruptcy Attorney at Garcia & Gonzales, P.C.
Are you looking for real relief from serious debt? If so, you can trust the experienced Denver bankruptcy attorney at Garcia & Gonzales, P.C. to provide you with experienced help and honest answers about your best debt relief options.
Contact us today by calling (303) 839-8888 or by emailing us using the drop-down contact form at the top of this page to learn more about your best debt relief options and find out how we can help you.
When you contact us, you will communicate directly with one of our attorneys, not a paralegal or legal assistant. We welcome Spanish-speaking individuals to contact us also – hablamos Español.