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Debt has become a common element of life in western society. With mortgages, car loans and credit cards, people are relying more and more on loans to purchase goods and services they need. The advantage of taking out credit is the ability to get what you need now and have the flexibility to pay it off over time. Without this availability of debt, people would have to save up for a longer time in order to acquire something they desire.
At the same time, debt can easily turn into a major problem if not managed and handled with care. This can happen to both individuals as well as businesses. Uncontrolled borrowing can create an unmanageable debt which can be difficult and almost impossible to escape from.
The reality of debt can be seen very clearly by looking at the consumer debt statistics in the United States. According to the Federal Reserve Bank of New York, consumer debt (not including mortgages) has grew from 1.1 trillion dollars in 2007 to 1.53 trillion dollars in mid-2018. This is staggering, and it goes to show how even citizens in the world’s most powerful economy have trouble keeping debt under control.
For individuals, debt can become a problem due to a lack of responsibility when it comes to making purchases they know they can’t afford. Oftentimes consumer goods are marketed as something that can make people’s lives easier and better. They don’t think about the fact that they could be missing out on paying off their debt each month, as well as accumulating additional interest on top of it.
Another factor which can cause individuals to enter into debt is missing too many payments. This can happen for a number of reasons, such as job loss or a health crisis. Without a steady income, it can be hard to face up to debt that is due each month. This can spiral out of control quickly and end in bad debt if payments are consistently missed.
Finally, business debt is another reality of today’s economic climate. Companies, as well as smaller entrepreneurs, take out loans to help build inventory or expand their operations. This can put them in a precarious situation if the borrowed money is not used in the right way or market conditions turn against them.
Though debt can be a major obstacle and challenge, it is not impossible to escape. Many people are able to get back on their feet and get out of debt by approaching the problem head on and by taking proactive steps to pay off their debt. This includes finding ways to budget and create an action plan that looks at the amount of debt and priority of payments.
In other cases, debt restructuring through a formal process is necessary. In this situation, a professional can help to identify strategies and solutions that can work to reduce the amount of debt and make it more manageable. This includes debt consolidation as well as working with lenders to reduce interest and fees.
In summary, understanding debt and taking active steps to stay on top of it is a very important part of life in the 21st century. Taking out credit can be a very useful tool, but if it is not managed responsibly it can quickly cause major problems. As always, it is better to be prepared and plan ahead than to be facing surprises at the end of the month.
