Debt spiral is basically a situation where a firm, an individual or a nation see ever-increasing levels of debts.
We, as individuals have to take some loan or another at some point in our lives. Most notably, this kind of a situation arrives when you take up a loan for college or for some technical education, as paying in cash for higher education is not possible for the most part. This is the point from where your balance sheet goes out of balance. Credit cards come into play, you do not keep a tab on your spending, you finish your college and you have a maximum of six months to find that job. During this period, you may buy a car (again with a loan), in anticipation that you will be able to pay off all your loans.
But you are faced with reality, when you get your job, and your monthly payments start increasing. To reduce the burden, you take another loan in the form of debt consolidation. Here, all your high-interest loans are clubbed together and refinanced into a low-interest rate debt. Though, this sounds like a good idea, but as soon as the monthly payments decrease, spending increases. This kind of a situation becomes into a spiral from which, the way out becomes tougher and tougher. You keep taking new loans to pay off the older ones, and this leads to bankruptcy.
To be able to face this, and more importantly to come out of it, becomes the only option left with you if you wish to live peacefully. You need to make a lot of changes to come out of the debt spiral. The first step is to stop this vicious cycle. Stop borrowing more money. Next, throw that credit card away. Pay for everything in cash, this way you will know how much you have and how much money you are spending. Next up, do a deep analysis into your income and expenses. You will have to stop spending, start saving and increase your earnings in a manner that you start saving enough to pay off your debts. Include your family in this process, so that they also spend less.
The collection of your debt into dangerous proportions took time, so its reduction will also take some time. Having patience is the key here. Come out of this debt spiral and live happily by keeping your earnings with you. And of course, with a balances balance sheet.
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