PolicyTray

Insurance Blog

Five reasons you get pulled into debt


All of us know that debt can lead us to very disastrous effects in life.

And yet, most of us are stuck in the pit of debt and credit card bills, asking ourselves, ‘why am I even in debt?’ and ‘how the hell do I get out of here?’

We’ve scrutinized the major causes of debt and thus we have shortlisted five of the major reasons that young Indians fall into the rut of debt.

1.       LACK OF A BUDGET

Most of the time, poor budgeting invokes debt. You must have a monthly budget. Without a proper budget, you will not be able to track your expenses. And if your expenses exceed your income, you will be pulled down to debt.

2.       INCOME ISSUES

If you are currently going through a rough patch in your career or if you are unemployed and are looking for a job – the period might be low. But the effect that it has on your finances in the long run, is huge. It can have a lasting effect, because you’ll be wanting to make ends meet and will thus be forced into taking up credits or loans.

3.       DEATH AND DISABILITY

A shockingly large number of Indians, are living without an insurance cover – and thus at the occurrence of an unfortunate event, they stumble into a severe state of financial crises. It is very important to get a life cover, especially if you have loved ones depending in you. 

4.       OTHER MEDICAL EXPENSES

Every single step you take inside a hospital is going to cost you money. Not having a proper health insurance will only make you slip into debt a lot easier. And when you don’t have the money to pay for your emergency bills, it will look easier to swipe and put the money on your card or take out a loan – but there begins your tread down the debt road. 

5.       LACK OF SAVINGS

If you want to avoid unwanted debt, try to be prepared for unexpected expenditures by saving some money. Being prepared for those rainy days, is a sure way to help you stay out of debt.

The whole point of leading a life with savings and lots of financial planning is to be self-sustained, after all.

READ ALSO:  Pitfalls of Financial Goals

READ ALSO:  Dealing with your debt

Written By: BALAKARTHIGA.M

Dealing with your debt


If your bills give you anxiety and your debts are getting in the way of other dreams, it’s high time you sort out your debt and get it fixed. Laying out a strategy and committing to it, will definitely get you out of debt, as soon as possible.

1.       Budget

It is as easy and as difficult as it sounds. Knowing exactly what you owe comes from strong budgeting habits. The more you procrastinate this, the more trouble you will be caught up in. Financial experts even discovered that some people resist doing this, because they’re afraid of what they’ll find. There’s nothing like seeing you’re spending staring back at you, that forces a behavioural change.

2.       Consolidate

One of the smartest way to sort your papers out is to consolidate multiple credit-card and loan bills into one loan with one monthly payment can help you manage what you owe. This will not only make managing the debt easier, but will also make paying it a lot less stressful. 

3.       Prioritize

If you can't pay all your debts each month, financial experts recommend focusing on keeping current on secured debt--obligations like auto loans and mortgages that are backed by property. Set aside an amount each month in your budget just to pay off your credit. You'll get a psychological lift from erasing each card's debt.

4.       Consult

We agree that sometimes, doing it all by yourself can be tough. It might be very easy to get all stressed, depressed and anxious as you see those big numbers. These emotions can be blinding as well. Which is why, we recommend approaching an agency that will act as a consolidator, collecting one monthly payment from the debtor and disbursing funds to creditors and make it much less hard on you. 

5.       Consider

Once you’ve made all the consultations and prioritizations, you need to consider what your options are and choose the best one out of them. This choice has to be made consciously after deep thought, because it can make or break your debt plan!

Yes, getting out of debts isn’t easy. But it’s also not impossible. If you are able to cast aside your emotions, and think logically with a committed strategy, you can win the battle against debt.

WRITTEN BY: BALAKARTHIGA.M