Where Did My Money Go? How Come I Have so Much Debt?

“Where did my money go?  Why am in so much debt? A friend asked when I tried to inquire why he seemed so distressed.  Have you ever found yourself in so much debt unaware? Can you identify with my friend’s feelings? It is possible to find yourself into so much debt within a short time. Sometimes it could be due to unavoidable circumstances or due to poor financial decisions. The second reason has been proven true among Singaporeans. Sometimes it is good to borrow funds. You can borrow funds to take advantage of a nice opportunity that can earn you a lot of money in the future.

For instance, you can advantage of an investment opportunity with the potential of paying back. You can as well borrow to finance your college education. One of the main reasons why people borrow is to cover up costs that often confront them before getting the monthly earnings. However, if you are not careful, you can borrow more than you can actually afford. This is something that has happened to many people, only that sometimes individuals ignore the red flags. In this blog, we are going to discuss some of the things that deplete your finances and led you into too much debt. Well, some of these situations can be beyond our control. But as we are going to see, poor decision making is often the major problem. So let us begin.

Failure to Budget and Overspending

This is actually one of the main reasons why people get into so much debt. Sadly, they often overlook it until it is too late for them. Overspending is a disease which if not addressed properly can lead to financial death. It usually happens when you fail to draft a budget and follow it. You end up spending a lot compared to your regular earnings, and the result is to turn to loans to finance your lifestyle. When you set up a budget, it becomes easier to monitor your spending and knows exactly what consumes your finances. For instance, statistics show one area Singaporeans overspend on the grocery. You go to the grocery shop, and you find yourself acquiring unnecessary items, yet this is something you can avoid by budgeting. We acknowledge coming up with a realistic budget can actually be problematic to many people.

We recommend you try out the 50/30/20 rule of budgeting. It requires that you categorize your regular expenses into needs and wants. Needs are the costs which, when not met, can have devastating impacts on your life and include rent or mortgage payment, and food, among others. It is recommended that you allocate 50% of your earnings on these expenses. Wants include the costs that can be postponed and may consist of entertainment and new clothing. Spend a maximum of 30% of your net income on them. The remaining 20% should be devoted to debt and savings. It has worked for many, and it will work for you. Budget and you will avoid overspending.

Medical Expenses

No one is immune to unexpected medical costs. In case you are supposed to undergo a costly medical procedure, you may get yourself out of finances. This is especially the case if you have not taken an insurance cover. But again, a medical cost can turn out to be so costly to be covered by insurance. If this happens, you may just have to turn into borrowing. Not that you do not have to go to the best hospital in the country to receive the best treatment unless you are covered by insurance, and it demands that you get there. You may have to research the cost of treatment, and you can get the best services but at affordable prices.

Failure to Save

Closely related to medical expenses, but this one stands alone here. What happens when you are plagued with an emergency? If you have not saved for emergencies, you may be compelled to turn to loans. Again, you are not immune to circumstances that can lead to unexpected costs, such as accidents. Knowing this fact should force you to save for emergencies. Every dollar saved is worth it.

Making Poor Investments

This is yet another common but ignored factor that often leads individuals into debt. It is an excellent decision to invest in your business or to simply put your money in any form of investment.  While you may have good reasons, an investment may turn out to be bad and make you lose all your hard-earned money. You may just have to take loans to get back on your feet financially. Sometimes investment may seem complicated when, in a real sense, it is not. You only need to make the right decision, and this involves seeking professional services. Talk to your financial advisor, and you will be assisted accordingly.

Poor Borrowing Decisions 

Here is where many people fail. Sometimes individuals are tempted by new targets offered by lenders. You may find yourself borrowing more than what you actually need. Lenders are in business and will be willing to provide you with loans on condition that you qualify. But remember you will have to pay back with interest. Only borrow what you need, and you will be safer. Also, individuals fail to shop around for interest rates and better terms.

Lenders charge different rates. Why should you pay more when there are cheaper alternatives? You only need to do research. Importantly, you need to know the loan that you actually need. Don’t just borrow because you need funds and you have an offer at hands.

Some payday online lenders can get you into financially, you have to be cautious which lending institution you’re borrowing from. For instance, individuals have found it challenging to get out of payday loans because they are so expensive. Once you pay, you feel you are in deficit and take another loan. You then find yourself in the vicious circle of borrowing. So, make wise borrowing decisions.

The Bottom Line

It is not wrong to borrow money. But if you are not careful, you may find yourself into a lot of debt. The best thing to do is to plan your finances and always make the right financial decisions. We have discussed some of the factors that can easily lead you to debts. Be determined to avoid these snares.

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