It’s 2020 now. How is your financial situation? I know, I know — we’re not supposed to ask such questions. I never really understood why it’s inappropriate to discuss finances in a personal way. What is it that we don’t want others to know? Do you worry that a forthright discussion will destroy the facade? Will you feel embarrassed if your friend has more money than you? Do we want to conceal the causes of debt in our lives? Finances are something every adult thinks about, some more than others. Would you think it is correct to say that debt is nearly inevitable in the modern world? Do you know many people who are 100% debt free? I don’t.
Just because most people nowadays incur debt doesn’t necessarily mean they shouldn’t be striving to restore their financial stability. I think it would also be correct to say that most people include financial stability as an ultimate goal in their lives. What causes so many people to be in debt? In this post, we’ll discuss issues at the center of most financial crises in the average U.S. household.
Americans are not healthy
We could probably do a year’s worth of posts on adverse health issues in the United States. I’ve read numerous startling accounts that suggest younger generations may not outlive their elders. Pretty scary stuff. With regard to finances, medical care is expensive, even for those with decent insurance coverage. If you or your loved one need medical treatment, and you’re unprepared to meet the expense, what do you do?
If you’re like most Americans, you might use a credit card to pay those bills. You also may have every intention on satisfying the balance at the end of the payment cycle. However, additional unforeseen circumstances or other issues might make it impossible to do so. This is how outstanding credit card balances get out of control, causing increased debt.
Causes of debt often include divorce
In a perfect world, every couple that marries would stay married for a lifetime. After all, it’s not meant to be a temporary state in life unless death of a spouse occurs. In reality, however, many married couples choose to divorce. Even if they use mediation or collaborative law to negotiate a settlement, it still costs money. Factor in child support, alimony and property division in addition to legal fees and you’ve got yourself a good recipe for serious debt.
There’s “a thing” nowadays colloquially referred to as “gray divorce.” It occurs when people who are 55 or older decide to legally end their marriages in court. It’s also a common cause of financial distress among the older population.
Living beyond one’s means
If you can honestly say that you have never been tempted to keep up with the Joneses, you’re in a rare category of people. Most of us want nice things when we see our friends’ nice things. Making ends meet in 2020 is typically challenging, even in dual-income households. The more stuff you have, the more expenses you probably have, as well. It’s fine if you have a tremendous cash flow and can remain debt free.
It’s another story altogether if you’re standard of living exceeds your ability to financially sustain it. Most people aren’t in a position to pay cash for new cars or houses. However, it’s best to avoid doing things like renting an oceanfront beach house that sleeps 20 if you only have funds to pay for a weekend at a campground. Living beyond one’s means ranks high on most lists regarding causes of debt in the U.S. today.
College is really expensive
I have a daughter who is currently paying her own way through college. My husband and I offer financial supplement as we’re able to help her stay on top of tuition payments. She thankfully earned a decent amount of scholarship monies but also has incurred some debt due to government loans. I admire her greatly. She is in the second semester of her sophomore year. Upon visits home, she works as many hours as she can to save up money for the following semester. She has a plan for paying down all the debt and is sticking to it.
That, too, is a rarity nowadays. Many people age 30 and beyond are deeply in debt because of unpaid college loans. I’m not talking $5,000 or even $15,000 dollars here. There are myriad people who owe $30,000, $50,000 and more on college loans. The trouble is that a lot of them are now married and raising children. Their financial focus is on making ends meet in their households. Those outstanding college loans are constantly pushed to a back burner. This issue is among the most common causes of debt in the United States.
Restoring financial stability
To get a financial train that has derailed back on track, you must first identify causes of debt. This requires full disclosure, and sometimes, brutal self-honesty. Devise a list of your current liabilities, as well as recurring expenses. Also list unnecessary expenditures that you can eliminate from your life, even if it’s temporary.
Execute a plan. The worst thing you can do to resolve causes of debt in your life is to do nothing. It’s not going to go away on its own and it’s likely to get worse. Some people choose immediate debt relief options such as filing for bankruptcy to help restore financial stability. Others simply layout a plan to take one step at a time, paying down debt, spending less and creating a more stable financial environment in their lives. The good news is that most financial crises are temporary and there are often numerous options available to help you resolve a specific problem. If you have successfully paid off debt, tell us how you did it!