Consumer debt in the United States continues to grow and is now approaching $3.4 trillion as of May 2015. The average person, including children, owes roughly $10,200 in some form of debt. Most of that debt is in the form of auto loans, student loans, and credit card payments. With so much existing debt and the numbers only getting higher, is there any way to reverse the trend? Possibly, but first we must examine why it is that people fall into debt.
- Cars – When your neighbors start driving the latest luxury SUV, you feel like you have to keep up. Spending $70,000 on a vehicle just isn’t in the budget for most people, especially when you can meet the needs of your family with a $25,000 vehicle. When buying a car, buy what you can afford, and avoid what you cannot pay for.
- Must-have gadgets – The latest phone, tablet, surround sound home theater system, etc. is something that you must have. When the newest iPhone is released, you immediately want to upgrade. The problem is that you cannot afford it. Having the latest gadget is fun and exciting, but it will also be obsolete very soon. Be wise when buying these types of items and only purchase when necessary and when you can afford it.
- Unnecessary obsessions – Some people just shop and buy things because it makes them feel good. Even if these items are not relatively expensive, continually making these purchases can wreak havoc on a budget.
- Co-signing loans – Too often, people get roped into co-signing for a loan for a family member or friend. When the friend or family member defaults on the loan, the co-signer is stuck with the debt. While co-signing a loan can produce positive results, be wary of doing so. You could lose a friend or a family member.
- Renting – There are occasions where renting items would make sense; however, if you cannot afford to buy a TV or some furniture, renting is not the answer. Save the money and buy a television or whatever the item may be.
- Credit cards – This is no surprise. The average family with one credit card has over $15,000 in debt. A credit card is not a ticket to buy things that you can’t pay for. As a rule, if you do not have the money to pay the credit card bill in full when it is due, do not make the purchase.
If people would realize that these are the biggest reasons why people fall into debt, they may be able to change their behaviors and stay out of debt themselves. For those who wish to pay off or consolidate debt, they can look into a car title loan from Embassy Loans, one of the Florida’s leading consumer finance companies.