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Why People Fall Into Credit Card Hell

tired looking womanIf you’ve run up $20,000 or more in credit card debt you probably know how this happened. On the other hand if you’re in pretty good shape so far as your credit card debt is concerned, you might be wondering how people fall into credit card debt … or how they could end up owing $50,000 or more.

Experts say there are basically seven reasons that cause people to fall into credit card hell.

Expenses that exceed income

Some people let themselves get into a position where their expenses exceed their incomes and are left with no option except to run up credit card debt.

As the result of a divorce

If you’re not aware of this, more than 50% of American marriages now end up in divorce and with this comes problems with personal finances. For example, if one party demands too much, the other may have to go into debt for attorneys’ fees as well as paying their ex-partner whatever the court orders.

Bad money management

Poor budgeting almost always means debt. People must track their expenses to see where their money’s going. When people don’t do this they can easily end up spending more than their incomes – which leads to big debt.

Underemployment

Many people found themselves underemployed as a result of the Great Recession. While they might believe this is just temporary it can have a lasting effect on their lives as they may then have to go into debt to make ends meet. If you find yourself underemployed, calculate your expenses and then think about looking for a second job. This could stop you from running up more debt.

Gambling

This is one of the most popular forms of entertainment for many Americans. In reality, it is just a way to move money from their wallets to the “house.” Plus, loans are very easy to get these days. People who become addicted to the idea of “striking it rich,” can end up mortgaging their futures as they try to win back what they lost.

Medical expenses

Medical bills are actually the number one reason why people get into big debt these days. Medical treatments can be very expensive and everything that has to do with medicine costs money and usually a lot of it. If you don’t have the money to pay for a visit to the hospital or clinic, it’s just easy to put it on a credit card or even take out a loan – which can mean big debt.

Not enough savings

People with little or no savings have nothing to fall back on when they run into unexpected expenditures. Most experts say that you should have the equivalent of six months’ earnings to cover emergencies such as a job loss, an auto accident or divorce.

A helpful infographic

Here’s an infographic that illustrates the steps that lead to credit card debt hell.

The-Descent-into-Credit-Card-Debt-Infographic 2

What to do if your partner doesn’t care about finances

If this were a perfect world both partners in a marriage or relationship would be interested in finances. However, this is not always the case. Some people care about finances while others don’t. Sharing your life doesn’t mean that you share everything or do everything together. So, what can you do if your partner just doesn’t care about or isn’t interested in finances?

Step one

A first good step is to let your spouse or partner know that you’re going to analyze your finances and develop a plan. Do you already know your short- and long-term goals? If not, now would be a good time to discuss them. Questions that should be addressed include things like “do want to buy a house” or “do you want to have children someday?”

The next step is to forget about your partner and dive into the details of personal finances on your own. You should read personal finance blogs and forums. If you want to become really knowledgeable, get and read some books. Make a plan. Then track your spending and create a budget that will allow you to meet the goals you’ve established in your plan.

It’s not about deprivation

Make sure that the budget you develop is not about deprivation. It should be about what both you and your partner realistically want and how you would work towards it through a planned approach. Your partner may find it’s important to buy things that you find unnecessary like an iTunes Season Pass to Real Housewives or the newest Grand Theft Auto. When this is the case, try to work it into your plan. If there’s not enough money to cover this, you will need to demonstrate why. Show your spouse or partner what you could do with the money instead such as paying your electric bill on time. You might be doing the hard work but your partner needs to sign on to your plan.

It’s showtime!

Next, you will need to settle down one evening and present your high level plan to your partner. In the event that he or she wants more details, you’ve won. You might find that your partner isn’t much concerned with the details unless it pertains to the amount of money you‘re saving up for something such as a vacation. If he or she questions your budget, provide answers and then if necessary make tweaks.

The beauty of this approach

The beauty of this is that if you have a partner or spouse who doesn’t want to think about personal finances, he or she doesn’t have to. Your spouse undoubtedly has strengths that he or she can bring to the partnership that you don’t possess. You might be great with personal finances but not so much when it comes to auto or home maintenance. If this is the case you could concentrate on running the family’s finances, while your partner takes responsibility for keeping your cars in good running order or for home repairs

Get going

The final step is to go live. Start executing your plan. Keep your partner updated as necessary. In the event something gets out of whack or you’ve accomplished something really awesome like paying off the loan, update your partner. Otherwise, just keep rolling along.

Could you make personal finances fun?family reading a book

Finally, one tactic that has worked well for many families is to make personal finances fun. For example, you could turn your budget into a game where the objective is to stay on budget. Your partner who just isn’t interested in finances might dive right in if you made things competitive. You could award prizes to the family member that comes up with the best ideas for cutting your natural gas bill or ways to reduce your grocery bill. Your partner might take much more of an interest in family finances if you were to make it a “race” to get to the next paycheck with the most money left over that could be saved or invested. To make this a real game, you could put up a “racetrack” chart showing how you’re doing on a day-by-day basis.

How about a contest to see who could find the most free stuff over, say, a thirty-day period? If you’re struggling with debt, you might make a game out of finding ways to cut your living expenses so you could get it paid off faster – with a prize to the person who comes up with the most.

The net/net is that if you have a partner who just isn’t interested in family finances, it’s okay. You can be the family’s vice president of finances, make a plan, develop a budget and then relax knowing that you have things under control.

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