The word is uncomfortable. It sometimes comes with the idea that you've done something wrong (you haven't) or that you're irresponsible (you aren't). Some financial planners estimate that the average 50-year-old American is well over $100,000 in debt.
Debt, on its own, is not a problem. It becomes an issue when you're one unplanned event away from not being able to make a payment. If you spend your paycheck the second it comes in, what happens if you lose your job? Savings are a layer of protection. You may not control whether you keep your job or your business stays profitable, but you are in command of your spending and saving.
Household debt
Drive through a neighborhood and you'll see household debt. Common examples of household or consumer debt include:
- Mortgages (and second mortgages)
- Home equity loans
- Credit cards
- Cars
- Furniture
- Student loans
Credit cards are revolving debt — the interest rate can fluctuate and the amount you pay each month can vary. It's not advisable to carry credit-card debt (the interest is high), but you won't default on revolving debt as quickly as non-revolving debt. In a genuine financial emergency, making the minimum payments can help you survive.
Non-revolving debt covers everything else on that list — your mortgage, home equity line, car loan, and student loan all have required amounts due at set intervals. If you're relying on your next paycheck to make a non-revolving payment, that's where you're no longer insulated from the unforeseen.
Medical expenses
This is what causes half the bankruptcies in America. Beyond the bills themselves, a medical event can leave you unable to work. Alongside medical expenses, unemployment and uninsured losses stand as the other common reasons people become bankrupt.
If you have debt you cannot pay, Maxwell Dunn is in a position to help. Contact us online today to schedule a consultation, and we'll discuss your situation and the options available to pursue together.
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