What Are the Main Causes of Debt in Canada

What Are the Main Causes of Debt in Canada?

To prepare for when debt occurs, it is helpful to understand what causes it. Sometimes, there are no realistic ways to avoid it.

A variety of factors can cause debt. One major cause of debt is overspending. Other causes stem from expensive life events, while others may stem from poor money management or failure to make payments on time. Proper financial management helps people when life throws unexpected events at them.

The following are some of the most common issues people face in terms of their everyday finances.

1. Poor Money Management

Proper financial management involves handling expenses, income, and spending in general. Without the right financial handle, anyone could easily get into debt. Whether buying things that are not needed or are too expensive, these decisions make paying off debt difficult. Creating a budget helps avoid a serious debt problem. 

2. High Costs of Living

Some people may have difficulty budgeting because of their high cost of living. Living in a bigger city or a city with a high cost of living will cost more money to cover basic needs. There are several things people can do to help manage costs. First, finding a good financial management software or program, and second, using the Internet to find coupons and discounts. Some grocery stores also offer special deals on certain days, something that can also help ease budget restraints.

3. Credit Card Overuse

Credit cards are very convenient, but some people can’t seem to manage them. Many people get into debt because they pay interest on their cards. People can prevent this by strictly paying off the balance each month, if not in full, at least the minimum amount. Another way to avoid this issue is always to use cash.

4. Lack of Savings or Emergency Fund

A good financial management plan requires an emergency fund. This consists of savings to use for emergencies or unexpected expenses. Setting up a debt snowball, or putting all extra money towards paying the debt, helps fix the debt problem. It’s important to maintain a consistent paying attitude. Effectively paying off the debt snowball leads to developing an emergency fund that can be used in specific situations.

5. Unexpected Expenses

Sometimes, a single expense can throw off a financial management plan. An unexpected event such as a flooded basement or car repairs can lead to financial strain. To help alleviate this problem, it is helpful to plan ahead with an emergency fund and money saved for the unexpected.

6. Medical Expenses

Medical expenses can throw people into a financial crisis. Whether it’s a simple infection or a major procedure, many people do not have the money to pay for it. To avoid this problem, purchasing health insurance is a good idea.

7. Job Loss

Losing a job is one of the most stressful things that can happen to a person. A lot of people don’t have the money saved to cover their expenses for more than a few months. Therefore, it is important to have savings for a job loss. Some people find another job quickly, but others may need help from the government or their families.

Conclusion

It is possible to manage everyday finances. Learning how to manage money effectively is a key component to properly managing your finances. Avoiding debt is important and can help people achieve financial stability. Learning to budget and save money can help manage your money.  

DebtHelper.ca provides customized debt solutions for all Canadians. We offer a range of consulting services and debt solutions designed to help you reach your goal of becoming debt-free. If you need debt consultants in Canada, we’ve got you covered! Get in touch with us today and let us know how we can help.