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Less than perfect credit OK

It never has been easier to incur large amounts of debt. To be a debtor definitely does not indicate that one is irresponsible or immature; rather, sometimes debt is inevitable or even necessary. You are not alone. In no particular order, following are some of the most common causes of debt:



1. Medical problems

Illnesses and unexpected medical emergencies can result in mass amounts of medical debt very quickly. While there is no way to avoid such expenses, per se, you can help to prepare yourself for life’s curveballs by maintaining an emergency savings.



2. Poor spending habits / Money management

It is essential to develop a monthly budget, and to stick to it. First, track all of your expenses for one week to determine exactly where your money is going. This will enable you to cut back where possible so that you can save the “extra” funds. It is so easy to spend more money than necessary and to rack up debt by spending mindlessly.



3. Loss of employment

Particularly when one person in a household is the sole breadwinner, loss of employment can result in immediate money troubles. This is another scenario in which an emergency fund would be invaluable.

4. Underemployment

If you find yourself in a job for which you are over-educated or over-qualified, then you might be tempted to live as if your income is more in line with the job that you really want. This is particularly true if you recently have been unemployed. While you may very well get that higher paying job in the future, it is important to balance out your expenses with your income as it is currently.



5. Lack of communication with your family

If you are trying your hardest to live frugally and to save each month, but your family members are not doing anything to further that goal (or vice versa), then your financial situation is not going to improve much. It is crucial that you and your family are open and honest about earnings, what money is spent upon, and where costs can be cut back. You need to be on the same page, and with similar goals.



Credit cards should be valued for their convenience, but you should not be using them as extra income. If you are putting purchases on credit cards just to make ends meet, then you may be on the verge of serious debt trouble. If you do not have enough money to pay for something in cash, then you really do not have enough to pay for it via credit card either.Few life-changing events have as dramatic an impact on finances as divorce.When money is tight and expenses have to be cut, entertainment costs often for the first to go. While this may be necessary, try to keep at least a small opening in your budget for leisure activities. If you do not, then you might restrict your fun so much that you end up splurging on a large activity or expense to make up for your extreme cut-backs. In this case, you probably will end up spending much more than you would have if you had allowed yourself a little bit of entertainment in the first place.Though it may seem counter-intuitive, it actually is easier for college students to get credit cards than it is for the rest of the population. Even though most have not yet established credit histories, lenders are willing to extend credit to college students because they assume that parents will help to pay off any incurred debt. Without experience, it is easy to charge up unnecessary debt – which can lead to a pattern of poor financial management.It is so much easier to swipe a piece of plastic than it is to hand over your hard-earned cash. Sometimes we get so caught up in the convenience of credit cards that we do not realize how much we have charged until the bill comes at the end of the month.

Go to Part II of this article.