Too many people feel like they will be in debt for the rest of their life. According to a 2019 poll, 68% of United States adults have no idea when, or if, they will get out of debt. A more staggering statistic is that 30% of people predict they will die in debt. If this includes you, take a step back and ask yourself how you got into this situation in the first place. Here are four reasons why you might not be able to break the debt cycle.
Remember, debt is a complex and overwhelming obstacle many people face. Even after reading this, you might still have questions. If so, contact McCarthy Law. Our debt attorneys can answer your debt-related questions and guide you through the settlement process.
You Don’t Know How Much You Owe
If you do not take the time to figure out how much you owe, you cannot make a proper plan to tackle and reduce your debt. Start by creating a list of all your debts, and choose which ones to pay off first. A good rule of thumb is to pay down the one with the highest interest rate. Remember, you should still make an effort to put some money toward student loans every month. If you do not, you will never get out of debt.
You Only Pay the Monthly Minimums
Making only minimum payments will almost guarantee that you stay in debt forever. Say you have $5,000 in credit card debt with a 15% annual interest rate, but you only make a monthly payment of 2%. Doing this will take you nearly 30 years to fully pay off the balance. Plus, with interest, your total amount may increase to over $12,000, which is much higher than the original balance.
Always do your best to pay your monthly credit card bills in full. It might stretch your budget but could save you thousands of dollars. Remember, many people end up in debt by buying items out of their price range. Only use your credit card for purchases you can afford.
You Are Not Budgeting
Being smart with money does not just mean tracking your money after spending it. You need to prepare ahead of time and budget for all upcoming bills and expenses. Many people use the 50-20-30 rule: 50% of your monthly income goes toward necessities, including rent, groceries, and utilities; 20% goes into a savings account; and the remaining 30% is for everything else. Before you start going out to eat every night or splurging on expensive items, remember to use a portion of that 30% to reduce your debt.
You Do Not Want to Make Sacrifices
You might still be in debt because you don’t want to make the necessary sacrifices. You need to ask yourself what you can give up now to live a better life later. This might mean eating at home every night. Going out to eat can easily cost you $30 or more. If you eat out multiple times a week, it can quickly go up to the hundreds. Buying groceries and making dinner at home is more economical and healthier.
Streaming services are also another costly luxury. With so many options, the monthly cost might be the same as a cable bill. Go through the subscriptions you have and narrow it down to one. Put all the money you saved by cutting unnecessary spending toward your debt.
Speak to a Debt Attorney to End the Cycle Today
Even after doing everything you can to get out of the debt cycle, you might still be struggling. If this happens, contact the debt settlement attorneys at McCarthy Law. We are committed to helping clients navigate complex financial situations and reach a favorable debt settlement. To learn more about our services, call (855) 976-5777 or complete our contact form.