The Top 6 Factors of Financial Instability
The Superintendent of Bankruptcy’s office has written a list of key elements believed to be the most common contributing factors of financial instability, and ultimately, insolvency. Their research has proven that debtors are likely to see more than one factor present in a case of insolvency, and that in fact, it is not unusual to see as many as six or seven.
Some of these factors are as follows:
- Family Role Models: Without proper role family models from a young age, children will not learn about the pressures and disciplines of adulthood. This can lead to improper money management skills, and eventually debt and bankruptcy.
- Marital Breakdown: Divorce can be a very costly procedure. Having to pay alimony and child support can often lead to debt and bankruptcy.
- Alcohol and Drug Abuse/Gambling: Substance and gambling addictions can be expensive, not only due to the large portion of income being spent, but also often because of the loss of jobs and opportunities that these habits often cause people.
- Compulsive Spending: The enjoyment of spending money and having certain things often compels consumers to buy now and think later, not realizing what they are doing. People buying on impulse often buy expensive and frivolous item that they cannot afford, often with credit.
- Lack of Education: Thousands of Canadians are uneducated about how debt and insolvency work, which often exacerbates their financial problems.
- Loss of Employment: The loss of a job, regardless of whether it was the debtors fault, or just simply downsizing, often leads to debt.
Bankruptcy is often the inevitable conclusion of not knowing how to fix your situation. Knowing and understanding the factors that lead to debt and insolvency may enable you to change them before they make your situation worse.
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