The topic of debt is one that a lot of people want to run away from. The problem with debt is that you can’t hide from it. You can let it bring you down or you can address it.
We believe in addressing debt and fear of debt. We also believe there’s a large range of issues concerning debt that most people never think about. With that said, here are XX things you need to know about debt.
1. Some debt is permanent
There are two kinds of debt that never go away; tax and student loan debt. Even if you declare bankruptcy, both of these will still be a liability you have to pay for. If you pass away and someone co-signed for you, it becomes their debt. If you took out a student loan before you were married your spouse is off the hook unless it was co-signed. If you took one out while married, your spouse will be responsible if you pass away. If one spouse has an IRS debt and you filed a joint claim, both are responsible for the debt.
2. Medical debts are now major penalties on your credit report
Years ago medical debt pretty much meant nothing except to the creditor. You could still get both a car and home loan even if the debt was large. That changed in the mid 2000’s and now that’s a big deal. More than 61% of all bankruptcies include a large medical debt; that’s why having insurance is a big deal. The lucky thing for you is that medical debts can’t show up on a credit report until 180 days have passed, so it’s in your best interest to call either your medical provider or the credit company representing them and getting on a payment plan or seeing if you qualify for financial assistance.
3. It’s best to pay off debt before you retire
Even if you’ve always been able to handle your outstanding bills while you had a job, once you retire it’s going to be problematic. Most people will generate income that’s probably half of what they were making before, and even though some things like health care will be reduced (initially at least), keeping up with a credit card that has a high interest rate or other outstanding balances is going to be tough to deal with. If you can’t pay off all of your debt, it’s best to go after debt with the highest interest rates.
4. Worrying about debt can lead to emotional distress and depression
It’s estimated that nearly 90% of all people who worry about debt have it lead to both of what’s mentioned above. There’s a significant number of people who even entertain the idea of suicide instead of working to figure out how to deal with their debt. It’s easy to say that worrying about debt isn’t worth killing yourself, but it can feel overwhelming.
5. Most people can keep debt low by having a budget
One of the biggest reasons people fall into debt is bad money management. Many people make enough money to pay all their bills on time, even pay them off sooner, but without knowing what they actually bring home and should be using towards staying out of financial difficulties, they spend their money without understanding it. A budget is the best way to know what you’re bringing in and spending on a regular basis and allows you to make adjustments towards spending less or making more if needed.
Whether or not you’re working for yourself or for someone else, an accountant can help you take a look at your debt load and offer suggestions to help you get control of it. We believe it’s always better to know where you stand because that’s the only way you can change your situation for the better.