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Debt Consolidation Facts

1. If you spend more than 50% of your credit limit every month, this indicates to the Credit Bureau that you do NOT have enough cash on hand to meet your monthly expenses. This will identify you as a high credit risk and will actually reduce your credit score by 60 - 70 points overnight (Fair Isaac).

2. If you miss 1 or 2 payments on your credit card debt, the issuing company will skyrocket your interest rate to a whopping 27% - 30%!

3. Out of a random sample of 3 million American consumers (included in Experian's National Score Index), 51% of them have at least 2 credit cards and 14% of them have 10 or more credit cards.

Top 10 Causes of Debt

3DebtConsolidation.com would NOT exist if there were no such thing as consumer debt. Peoples' lives would be a lot less stressful and we would have less bankruptcies every year. In this article, we will describe the top 10 causes of debt that if avoided, will help you live a debt & stress free life and achieve your American dream.

Top 10 Causes of Debt

» Less Income, More Expenses
» Saving little or not at all
» Divorce
» Poor Money Management
» Hoping to win the lottery
» Underemployment
» Big Medical expenses
» Financial Ignorance
» Non Financial Communication
» Gambling

1) Less Income, More Expenses

It so happens that the main breadwinner of the household loses his job but monthly expenses are not cut down in line with the reduction in income. This obviously leads to a rise in debt. The family is forced to use their credit cards for groceries, utilities, etc.

2) Saving little or not at all

You should save for atleast 4-6 months of living expenses incase an unfortunate tragedy happens. For example, if you lose your job on June 1st, you shall have enough money to maintain your current lifestyle till December 1st of that year. Until December 1st, you can find yourself new employment or open your own business. You will often hear the phrase "Pay Yourself First." Having enough savings for a rainy day is always a worthwhile investment. Do it and you shall be better off!

3) Divorce

Fees for the divorce attorney, division of assets between you and your spouse, proceeds given to children, etc are an easy way to rack up a huge debt. Filing for a divorce may force you to quit working for sometime which leads to reduction in income (point #1).

4) Poor Money Management

Poor money management is one of the best reasons why so many families accumulate lots of debt. Not having a monthly spending plan and not keeping track of your monthly bills makes you unaware of where your money is going. You might be spending hundreds of dollars every month towards items that are useless and have no value in your life, yet you do not realize it. While your money is going towards purchasing useless items, you might also be charging your necessary purchases on your credit card, forcing you to pay interest on these purchases every month. To read more about creating a household budget to reduce debt, read our articles on Do It Yourself Debt Reduction.

5) Hoping to win the lottery

Most people hope to win the lottery but the chances of that happening are 0%. Do not spend tomorrow's saved money today just because you expect a promotion in your job or are expecting an inheritance from a deceased grandfather. We all know life is unfair and things can go wrong more easily than going right.

6) Underemployment

If you are underemployed meaning you are not getting enough working hours at your job, you should also cut down on your lifestyle to match your current income. Forget about driving a BMW if you are working only 30 hours a week at the Home Depot making minimum wage. However, if you are a Financial Controller with a local Corp. then you should think about driving a BMW. Know what i mean?

7) Big medical expenses

The cost of obtaining cures and medicine in America is increasing every year. The Federal Government is cutting down healthcare spending every single year. Almost all doctors accept credit cards in the USA. While you need treatment now, you do not have the cash. So what do you do? You use your credit card because you do not have enough savings in the bank.

8) Financial Ignorance

Important topics such as saving and investing your personal finances are not taught in school. It's on you to learn to save for a rainy day, as well as manage your money so you can own a house over the longer term.

9) Non Financial Communication

Communicate your current financial health with your spouse and your children and make them aware that if you cannot afford a certain item, they should not ask for it. For example, if your 18 year old son wants a new nice hot sports car, communicate to him that you cannot afford it. Instead, he should go for a smaller car that gets him from Point A to B. You and your spouse should promise to each other that you will not hide your spending habits. One of the most common reasons why so many couples in the US undergo divorce is because they rack up huge credit card debts without the other spouse's knowledge. This then leads to divorce which can help in racking up even more debt (Point # 3).

Many people put not only their own disposable income on the line when gambling, they also borrow loans to gamble! You see, Casinos would not exist if every one person won money in it. Probably 1 in every 100 people wins money in the casino over the long term. Another huge boom in the gambling industry is the emergence of Party Poker and online gambling websites that are illegal in the USA. Online gambling is so easy that you don't even have to step out of your house, you can do it right in your bedroom with a small PC!