Four Ways Debt Sneaks up on You - And What to do About It

Unless you track your overall spending with every purchase, debt can ambush you pretty quickly. Fortunately, you can prevent it from piling up by diligently monitoring where your money is going.

Here are four common causes of debt that aren’t always obvious.

1. Lack of a budget

If you don’t know how much money you spend every month, you may be in for a world of hurt when that credit card bill arrives. Check your credit card and bank account statements to start tracking your expenses. You may be spending more than you think on things you don’t really need. Make adjustments and budget accordingly.

2. Taking trips on credit

It’s easy to get wrapped up in vacation fun – just make sure you’ve budgeted for it. Try to plan your trip as far ahead as possible to keep airfare, lodging, and daily expenses within reasonable parameters. Putting it all on a card and figuring it out later can dig you deeper into debt.

3. Never saying “No” to your little ones

It’s never easy to deny your children when they ask for a must-have toy or that hot item “all their friends have.” But if you rely on credit for every request, it’s going to wreak havoc on your family finances. If you know a request is coming – like attending a certain summer camp or playing sports during the upcoming school year – start saving now.

4. Paying debt with credit

Transferring balances to lower-rate credit cards or debt consolidation loans can be helpful. It can roll your debts into one sum at a more affordable rate. However, make sure you can pay it off. For example, let’s say a promotional rate expires on a credit card, and the APR jumps. If you can’t afford your new interest rate, you may end up just transferring the balance again. If you’re using credit to pay debt, always have a plan in place for paying the balance off as quickly as possible.

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