Although many people end up in debt over unforeseen circumstances, we could all use a little education and training in how to manage our money better. One of the hidden benefits to debt negotiation or other options is that it can teach you a lot about your finances. However, you don’t have to default on payments to learn a thing or two about your finances.
One of the most common bad habits among Americans today is a failure to save money. While many people have some money saved, this amount is generally far from the amount needed to sustain bill payments in the event of a job loss or lack of income. The average American family has less than one month’s worth of essential living expenses in their savings account, whereas they should have a minimum of 4 to 6 months.
Another mistake people make is using credit cards unwisely. Credit cards should be viewed as a financial tool for improving credit history, not for convenience in purchases. Charging gas, groceries or other items that could be bought in cash is a terrible habit that many people fall into. Credit card purchases should be planned and balances kept at a manageable level, ideally less than 30-40 percent of the total credit limit. This prevent unnecessary spending and keeps payments within one’s budget.
When people notice their debts become overwhelming they may seek out a debt relief solution. Often times people chose the wrong solution or fail to execute the plan properly. When attempting to reduce debts on their own they may not allocate enough funds to make a dent in the balance, keeping them in debt longer. Debt management solutions should be considered carefully through lots of education or with the help of a trained professional.