The pitfalls of debt

There are many lessons in life and most of them we are able to learn from, whether it is something as serious as a bad business decision or something as easy as falling out with a friend over a needless argument. In most situations, the biggest problem is the mess that is left after the mistake has been made and getting into debt is one of the worst of these. 

With money being such a sacred object in today’s world, it is vitally important that we do our best to stay in the black as much as possible, but despite that, the consumer debt in most first world nations is beyond staggering. The amount of business debt isn’t even worth thinking about.

In some occasions, trundling into debt isn’t of the fault of the individual, but there are many situations where a person has simply lived beyond their needs through greed or addiction.

It is important for individuals, but families in particular, to be aware of the pitfalls, as well as the scenarios that might be beyond their control. 

Redundancy/loss of income

Even for the slightest of periods, losing your income can have catastrophic effects, be it financially or emotionally. Obviously the longer you’re out of employment, the more debt will stack up if you’ve got such payments as rent, a mortgage or car payments to commit to, as well as the day-to-day means of food shopping and keeping warm in winter months.

Downfall of a business

The last seven years or so years has seen many a household name bite the dust of financial ruin, most recently in the UK HMV and Blockbuster, so it’s hard to really give blame to much else other than the dire financial situation. However, business owners must not get in over their heads with running costs and they should look to measure outgoings up against what they are bringing in as income; also make sure you know who has responsibility of all debts incurred. 

If it comes to a point that the business is going under, make sure you are aware of the different types of liquidation that include members’ voluntary liquidation and creditors’ voluntary liquidation. 

Gambling

This area is pretty much self-explanatory and is a very dangerous pastime to get involved with if you struggle to pull yourself away from it. Gambling is very addictive and should be treated with caution; it is important to understand that going from the odd £2 bet on the football to basically living inside the bookies is an easier process than most people are aware of.