June 25, 2014

Understanding Your Debt

The first step to recovering from debt is to identify that an issue exists and investigate how the issue came about so you can avoid it in the future. If you are in debt you want to work on paying off your debts but you also should try to gain an understanding to prevent returning to the same place in the future.  This is where debt counseling is beneficial. Let’s review some common causes of debt.

Income Lower than Expenses

This can be caused by a variety of factors including a reduction in income but maintaining the same lifestyle or an increase in expenses without an increase in income. If your income decreases it is important to create a budget to make sure your spending is not higher than your new income. Appropriate items need to be cut or minimized. If one expense increases, such as an increase in prescription costs, it is important to evaluate other areas of your budget to determine where decreases can be made to keep yourself from going into debt.

Improper Money Management

If you do not have a monthly budget it can be difficult to determine how much money you have available to spend. Track how much money you earn and spend for an entire month to see where your money is going and then create a budget accordingly. Also investigate if you have unnecessary expenses that can be cut.


Divorce causes a strain on finances because now two households must be maintained with the same amount of money that was originally supporting one household. In addition the divorce process typically requires the payment of attorneys. A downsize in lifestyle (such as smaller home, less expensive car, etc) may be required after a divorce to prevent accumulation of debt.

Medical Expenses

If your health insurance policy has lapsed or you suddenly need an expensive medical treatment it can be easy to wind up in debt. It may not be possible to avoid medical expenses as health has to be a priority. Many hospitals are willing to set up a reasonable payment plan so it is worth checking into before you miss payment or put the expense on a credit card which you will not be able to pay off quickly.


Many people think they will win big when they gamble which will get them out of debt. Instead they wind up going into to debt as they keep attempting to win. The truth is it is unlikely you will win big. It is rare and gambling can become an addiction which requires help to overcome. If you think you have a gambling issue get help.

Not Enough Savings

Unexpected expenses are bound to occur. The furnace breaks and needs to be repaired or replaced or the car breaks down and requires an expensive repair. These items are necessary and you will have to come up with the money needed. It is best to have some savings for these items. In addition savings can provide a cushion if you suddenly face medical expenses, job-loss or divorce.

If you have found yourself in debt and are working to get out of debt it is worthwhile to also scrutinize why you ended up in debt. Gaining an understanding of how the debt occured will help you develop a plan to avoid being consumed by debt again in the future.  For help getting out of debt and learning how to avoid debt in the future contact us at Christian Credit Counselors.

Do you want to know more about debt and how you can make smart financial decisions now that will help you secure a more prosperous financial future? Sign up for our newsletter for monthly money tips.

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