Household debt is a serious problem in Brazil. Currently, most Brazilian households have at least one debt. Because of this, many people live with anxiety and stress.
In addition to suffering greatly from the situation, people are also a little further away from their financial goals. After all, having a negative credit rating makes it harder to achieve consumer dreams.
But what are the most common causes of this debt? If we find out, can we avoid this situation?
Let's see the answer to these questions below!
Overview of household debt levels in Brazil
If you are currently in debt, there is no need to be ashamed. Did you know that this is a very common situation in Brazil these days? According to data from the CNC (National Confederation of Commerce of Goods, Services and Tourism), around 67.41% of Brazilian families declared themselves to be in debt in July 2020. This is the highest level recorded since 2010.
The survey also indicated that 15.51% of households declared themselves to be “very indebted”, an increase of 2.2 percentage points compared to the same period last year. In terms of duration, the survey indicated that for more than a third of those in debt, the commitment lasts for more than a year.
Main causes of debt
It is true that the level of household debt is high in Brazil. After all, almost 7 out of 10 Brazilian households are in debt.
But why does this happen?
There are some common reasons why families go into debt. This doesn’t mean that they cover all cases, of course. After all, each family has its own unique story. However, understanding the most common reasons can help us avoid them.
Unemployment
The main reason for debt is quite obvious when you think about it: unemployment. If people are not employed, they don't get paid. If they don't have money, they can't pay their bills, right?
Currently, the unemployment rate in Brazil is 11.9%. This means that almost 13 million people are unemployed.
Debt usually appears in these cases, when the person is caught off guard by being fired shortly after having committed to a purchase in installments, for example.
To make matters worse, even those who have managed to find a new job in the job market suffer from debt. This is because the new salary is usually lower than the old one. Therefore, it is not possible to cover the same expenses as before.
Lack of financial education
One reason that increases the chances of getting into debt is the population's lack of financial education. After all, the economic mechanisms of the market can be a bit complicated to master. A mistake when dealing with a credit card revolving credit, for example, can turn into a debt that is difficult to manage.
The less financial education you have, the easier it is to make this type of mistake and the greater the chances of accumulating debt because of it.
Improper use of overdraft or revolving credit
Revolving credit or overdraft are tools for emergency situations. However, if misused, they can become villains in your financial life.
The reason for this is very simple: they have the highest interest rates on the market.
So, a small debt can quickly turn into a huge debt. That's why you need to be very careful when using an overdraft or revolving credit.
Excessive consumption
Taking advantage of a promotion can be a great way to finally buy that product you've been eyeing for a while. However, it can also be a way to get into debt.
This is because impulse purchases are a fertile source of debt. The reason for this is easy to understand: if we buy without planning, we can go over our spending limit. If we can't pay that month, the debt goes into the credit card's revolving credit (or overdraft) and starts accruing interest.
This is a typical scenario for the new ball effect to create a huge debt.
Tips to avoid debt
Understanding the causes of household debt is the first step to avoiding it. However, it’s not enough to just know what causes debt, is it? You also need to know how to act to avoid having problems with it.
So, check out some good actions below that can reduce your chances of getting into debt.
Invest in financial education
Remember that one of the reasons for family debt was the low level of financial education in Brazil? Therefore, you can reduce the risk of getting into debt if you learn more about these tools.
We know that financial education can be a bit intimidating. After all, “economese” is a language that scares us. However, it’s not difficult to learn the basic mechanics of your financial life. With a little dedication (and good teachers) you can learn what you need to know.
An easy way to learn more about the subject is to follow our Blog and our Social Networks. Here, we talk about several essential topics for your financial life, teaching you how to deal with money and prevent debt. All in an accessible and uncomplicated way.
Write down all expenses
One way to keep track of your spending and avoid getting into debt is to write down every purchase you make. If you don’t like using pen and paper, you can use a financial organization app.
This way, you can better control how much you can spend at each moment of the month. Did you reach the 15th and go a little over your target for the period? No problem. You can adjust it in the second half of the month.
Avoid impulse purchases
Impulse shopping is the gateway to excessive consumerism. The consequence of this behavior is debt, since there is a limit to how much we can pay each month.
Therefore, it is best to avoid making impulse purchases. Of course, this is easier said than done, but there are some techniques that can help with this. See below:
- do not have quick access to your money and/or card;
- use the “time rule”. When you want to buy something, force yourself to wait a few hours or days to see if you really want to buy it or if it was just an impulse;
- avoid visiting promotional or sales websites;
- Check that you don't already have the item (or something similar) at home.
Household debt, as seen, is a serious problem in Brazil. However, it is a situation that can often be corrected with financial education, personal control and organization.
If you want to take a step forward in your financial education and become more independent in this area, how about starting by negotiating your debts with discounts and installments that fit your budget?
To do this, just access the Descomplica Finanças website!
