It’s officially “spooky season,” but there are scarier things than goblins, ghouls, and vampires. As a financial advisor, one of the truly frightening things I encounter is people in tough financial situations which could affect their future or their current quality of life. Unfortunately, many of these situations could have been avoided by talking with an experienced financial advisor, making better investment decisions, and avoiding unnecessary or excessive debt.

Let’s talk about the last item on that list: debt. While a certain amount of debt isn’t a bad thing, some debt is more dangerous, debilitating, or unnecessary than others. Here are 5 examples:

Credit Card Debt

One of the easiest ways to slip into severe debt is to keep a high balance on your credit card. Credit card companies often charge astronomically high interest rates, often ranging anywhere from 12% to 30%. According to an article published in Forbes last month, the average credit card interest rate was an astonishing 28.05%. With an interest rate like that, debt can easily snowball until you’re buried under an avalanche of unpaid interest.

What to do?

Rein in unnecessary spending and do your best to pay off your credit card balances every month. If you currently have credit card debt, talk with a financial advisor to develop a plan for paying it off.

House Debt

House debt is more than just your mortgage payments. It also involves all the repairs, upgrades, and remodels that go into your house. That’s why it’s important to know exactly what you’re getting into when you’re house shopping. Will the mortgage payment put a strain on your monthly finances? Does the house require so many repairs that you’ll have trouble keeping up?

What to do?

It’s important to think about many different aspects of a home before putting in an offer. Make sure you do NOT bypass a home inspection, so you know exactly what you’re getting into. Additionally, you may want to consider downsizing to stay within budget (Does your pet dog really need his own room? Do you really need a separate piano room?).

Student Loan Debt

With the fast-rising cost of education, student loan debt has become a major concern for many individuals. Student loans can quickly add up and become overwhelming, especially if you’re not able to secure a high-paying job after graduation. As of this year, there is $1.75 trillion in total student loan debt in the U.S., which breaks down to $28,950 per borrower. And that means many students have MUCH more debt—often over $50,000.

What to do?

It’s crucial to carefully evaluate the potential return on investment for your education and explore alternative options, such as scholarships or grants, to minimize your reliance on student loans. In some cases, it may make sense for a student to explore alternative options, such as community colleges or trade schools.

Payday Loans

Payday loans are short-term, high-interest loans that are typically used to cover immediate expenses. These loans often come with exorbitant interest rates and fees, making them incredibly difficult to pay off. Many people who turn to payday loans find themselves trapped in a cycle of borrowing and struggling to make ends meet.

What to do?

Avoid payday loans at all costs. Instead, explore other options such as creating a budget, seeking financial assistance from family or friends, or consulting a financial advisor for alternative solutions.

Medical Debt

Unforeseen medical emergencies or unexpected health issues can lead to significant medical debt. Even with health insurance, medical bills can quickly pile up and become overwhelming. Medical debt can also have long term consequences for your financial well-being.

What to do?

If you find yourself facing medical debt, it’s important to communicate with your healthcare provider and work out a payment plan or negotiate a lower bill. You may also be eligible for financial assistance programs. Additionally, consider reviewing your health insurance coverage and exploring options to mitigate future medical expenses, such as a health savings account or supplemental insurance.

Debt isn’t necessarily a bad thing (most people, for example, rely on a mortgage to purchase a home), but it can become a bad thing when it is out of control. Certain debt comes with high interest rates and can be difficult to pay off. I recommend avoiding unnecessary debt whenever possible and seeking help from a financial advisor to develop a personalized plan for managing your debt and securing a stable financial future.

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