There are many reasons why anybody’s financial situation can spin out of control. From poor spending habits to unexpected life changing events – some causes may be more preventable than others.

Change in income due to change in your job situation. If you have lost your job or had no choice but to take a lower paying job due to a bad economy, you will have to adjust your living expenses accordingly. If your mortgage or car payments exceed what you can realistically afford, consider selling your home or car before incurring unreasonable debt.

Divorce. A divorce can be expensive. The consequences of a divorce can ruin you financially. Depending on the situation, the cost of divorce an be devastating as assets are split or worse – awarded to the other party. To that add the cost of child support, renting or buying a new home and the numbers may already be in the red. Prenuptial Agreements have become more accepted and can protect your assets in the case of a divorce.

Poor spending habits. Uncontrolled spending without establishing a monthly budget can push you into a hopeless debt hole. It is essential to write down the monthly net income and the amount of fixed monthly expenses so you can keep track where your money goes. Without a monthly plan, you will soon run out of money for essential spending and start buying on credit, entering a vicious cycle of trying to catch up with your debt.

Low wage job. When working in low paying temporary jobs to make ends meet in hope of finding a better job in the future, it is dangerous to assume that the future higher paying job is guaranteed and therefore establish disproportionate spending patterns relative to the current income.

Gambling. A seemingly benign activity, yet highly addictive and toxic when you cannot stop. The chances that you can lose everything in matters of minutes are much higher than the very, very slight possibility of hitting the golden jackpot. Know yourself and enjoy this past time with great caution.

Medical expenses. Illness can strike at any time, so health insurance coverage is a must. With health care reform passed, health insurance will no longer be optional. The new health care reform will ensure that illness will not force anybody into bankruptcy anymore.

No or little savings. Closely related to poor spending habits, setting aside savings is essential when making a monthly budget. An emergency cushion of at least three months’ salary can save you from having to file bankruptcy should disaster strike.

Poor investments. When investing money, high risk investments with the promise of high returns can be tempting. This is not much different than gambling. Carefully weigh the risks against the potential gain. Work with experienced financial advisers and be mindful of how much money you can actually afford to lose without suffering financial pain.