Recognizing Sources of Debt

While it may be easy recognizing you are in debt, it is also important to be wary of the easy sources of debt to understand potential pitfalls.

Easy Access to Credit

Credit card companies target nearly every sector of society with savvy offers. This can impact everyone from college students, to those looking to retire. No matter where you are at, you are likely part of a targeted demographic in place by credit card companies.

Easy Access to Money

Notice this is separate from easy access to credit! ATM’s and debit cards are everywhere you go and everywhere you spend money. People always spend more using plastic over cash due to the ease of access.

Consumer Culture

Trying to keep up with what is trending or is a show of success, and style. Most of the trend setters are given free product or paid to advertise their products. Most consumers do not have that luxury, however, but still try their best to stay with what’s in the now.

Changing Technology

Technology is constantly changing, cell phones, household appliances and gadgets, and even cars are changing yearly and often advertised as big improvements. Every change not only increases what consumers pay for these items, but adds to the total spent on upgrades that are likely not even necessary.

Lack of Financial Literacy

Many people fall into debt because they fail to evaluate credit offers properly, do not understand interest rate and finance charges, and are not proactive in the management of their finances. Most creditors are aware of this and will likely get agreement and signatures on the first offer, regardless if better ones are available.

Financial Setback

This includes loss of income/job, medical emergency, or some other unforeseen cost. While these are more often than not unexpected, there still are steps that can be taken toward being financially prepared for a bad surprise.

Spending Too Much

Many people view credit as “free money” or as a means of paying a large purchase over several months. There is little to no regard placed on interest charges and other fees that ultimately increase their debt. This paired with no saving plans or things that might be categorized as ‘wasteful’ spending can lead to overspending and setting yourself up for the possibility of financial setback.

Where does that leave you?

At time it can be hard to be prepared or understand your financial state on your own. If you would like help in determining what kind of spender you are and ways to change your spending habits, don’t hesitate to reach out to one of our credit mentors to help get you on the right track!

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