Copyright (c) 2010 Suzy Vanstrusen

When it comes to the risk of bad debt, no one should be complacent. Indeed, anyone can get stuck in serious debt problem at the most unexpected times. This article presents the real causes of debt as consumers need to be aware of. Awareness and preparation is the best way to protect ourselves against the threat of bankruptcy.

Spending more than your income permits. Some people may think that they have their spending under control. However, you must first get a piece of paper and pen before you can make such claim. List down everything you bought or paid for in the previous month. You must include your transportation expenses, groceries, utility bills and personal purchases. Tall all costs and compare it from your monthly income. One of the things you should ask yourself is, "am I guilty of overspending?" You may be surprised to find out that you are spending more than what your earnings allow. Based upon your list, create a new budget plan that will complement your earnings.

Not setting aside for your savings. Have you saved enough funds in your savings account that can support you and your family (if you are the breadwinner) for at least 6 months? Based on a recent survey, a number of consumers don't have an emergency fund nor do they have money in their savings account. Credit counselors advice all consumers to save money in case they lose their jobs or face up to other unexpected events.

Not setting a budget. If you do not follow a budget plan, then it is most likely that you are spending more than what your income permits. An efficient budget plan must include monthly bills, debt repayment, insurance, and savings. Be sure to spend your salary on things that are really important or essential. If your monthly earnings is not sufficient to cover for everything, recognize your priorities.

Gambling. Each year, many people become victims of gambling addiction, with no other option left but to file for bankruptcy. NEVER depend on gambling as a means to get money. Instead of buying the lottery, hoping to win, save it up and try to find other realistic means of earning.

Not securing an insurance policy. Do you have an insurance policy? Unexpected things can happen such as accidents and emergencies. Getting an insurance to protect you is a must to help you avoid the threat of bad debt. For example, medical bills can instantly put you in a serious debt situation in a matter of days. By signing up for a health insurance, you can count on financial support from your insurance company during times of need.

Not setting priorities. Many consumers are guilty of uncontrolled spending. As merchants introduce latest gadgets, appliances, and new vehicle models in the market, it is easy to get drawn to the hype of advertising. Before you know it, you could be stuck in credit card debt. To avoid financial danger, it is crucial for everyone to realize the value of saving money and that frugality is a true virtue. You should be able to distinguish the difference between what you WANT and what you really NEED.