Having debt is not a good thing, but sometimes unexpected events can lead us into debt. It's manageable if we have the discipline to repay it in full and on time. However, some of us neglect to take care of our debts and even take on new loans, which is certainly not a good idea. Ultimately, this can lead to a situation where we accumulate so much debt that we can't repay it, potentially resulting in bankruptcy. Therefore, we should avoid falling into such debt as much as possible for our own sake. Today, MoneyGuru.co.th will explore the causes of over-indebtedness and what leads us to this situation.

           What Causes Over-Indebtedness?

           Spending Beyond Our Income

           This is often the starting point of falling into debt. If we spend more than our income, the excess spending becomes our debt. Reasons for overspending include emotional spending, where we buy things impulsively without considering their impact on our finances. Once our income runs out, we may resort to using credit cards, and when repayment time comes, we only pay the minimum. Paying the minimum is a subtle indication that we are starting to face financial problems because if we had no issues, we would be able to pay the full amount. If this continues for several months, our debt will grow larger due to accumulating interest, leading us to a situation where we can no longer repay, known as “over-indebtedness”.

           If we want to avoid this situation, it's advisable to keep a record of our monthly income and expenses. We should document every expense, no matter how small, even if it's just a few baht. At the end of the month, we can review our spending and identify unnecessary expenses. By cutting out these unnecessary costs, we can save more money for ourselves.

           No Emergency Fund for Unexpected Events

           While emergencies may not happen often, they always come with additional expenses. For instance, if we have been healthy and rarely face illness, we might not set aside money for medical expenses, thinking we won't get sick. However, one day we might fall seriously ill and need to stay in the hospital for an extended period. This will incur significant costs, and without savings, we may have to borrow money from others to cover medical bills and general expenses for ourselves and our families. The more we borrow, the more debt we accumulate, and it can take a long time to repay. If we're not careful, we could end up in a situation of over-indebtedness. If we don't prepare for such situations, we may find ourselves in debt without any options.

           It's best to plan ahead and save for emergencies, aiming for about 6 to 10 months' worth of regular monthly expenses. This way, if we become ill or unable to work, we will have funds available to cover our expenses without distress. Additionally, we might consider saving for medical expenses specifically, so we have money set aside for treatment when needed.

           The two causes we've discussed today are common reasons many people find themselves in debt, potentially leading to over-indebtedness. We hope this reminder encourages everyone to plan their finances and save more, so that in the future, we won't face difficulties.

Thank you for the information from www.moneyguru.co.th