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15 Reasons Why You’re In Debt

15 Reasons Why You’re In Debt

No matter how young or old you are, you have probably had some experience with being in debt. Maybe you’ve never had it yourself, but have seen others affected by it, or maybe you have a lot of it. Some people consider some types of debt as good (such as a mortgage or student loans), and other types of debt as bad (such as credit card debt).

Whatever type of debt you have, there is probably a reason why you have it. I do believe that learning and understanding why you have debt is the first step to controlling it and, ultimately, eliminating it. If you don’t understand your reasons for having debt, then it would be very hard to stop engaging in these debt-inducing behaviors.

Below are 15 common reasons why you may have debt:

1. You are trying to keep up with the spending of others.

You might be in debt because you want the latest and greatest things, and you want to buy the things that you have seen others have. However, if everyone is spending money and going into debt to keep up with others, then it’s just a never-ending circle. An example would be keeping cable even though you know you can’t afford it.

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2. You think, “Oh, I’ll have time to pay for it later.”

You might think that you will have plenty of time to pay off your debt later, but each dollar charged now can really hurt you down the track. You should be able to afford your lifestyle now. Can you really afford that item?

3. You think, “What’s a couple more dollars charged?”

You might think that one more charge on your credit card won’t hurt you, but this isn’t the best way to view it. It all adds up!

4. You have not thought about your total pay, including taxes.

If you don’t pay taxes directly out of each paycheck, then you may be spending more than you actually have. If you don’t account for taxes, then you might be surprised at tax time each year.

5. You don’t have health insurance.

You might be in debt because of a medical issue. This is why health insurance is important. Because even if you don’t think something will happen, if it does you might not be prepared for medical costs. Treat health insurance like any other necessity (such as car insurance), and find room in your budget for it.

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6. You were never taught about credit card debt.

Many people don’t know much about — or even understand — credit card debt. Do you know what minimum payment actually means? Surprisingly, many people don’t know! Interest still accrues when you only make the minimum payment (unless you have a 0% interest rate card).

7. Your friend bought it, so why can’t you?

I have a friend who always buys the latest electronics. However, if I spent the same amount that they did, my budget would not be happy. Just because your friend can “afford” it, does not mean that you can.

8. You are overspending.

It can be as simple as that. You are spending more than you make each month, and you are charging the rest. This then leads to an increase in your debt. You need to sit down and come up with a realistic budget.

9. You have a house or a car.

Homes and cars are expensive, and there are a lot of little expenses that pop up. If you are not prepared for these expenses, then it can lead to even more debt.

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10. You go to school.

Attending school is expensive. You might have to take out student loans for it. However, try to (legally) make as much as you can in order to pay in cash each semester. It can be hard though. Try to find the best value school and earn scholarships.

11. You don’t have savings.

Without savings, life can be very hard and stressful. The smallest surprise expense can lead to debt. This is why an emergency fund is important to have.

12. You have a reduced income.

If your income is suddenly reduced, then this can really hurt your budget. This might then lead to you adding to your debt. Try to think of ways to diversify and increase your income, so that you are not as reliant on one form of income.

13. You gamble.

If you gamble, then there is major risk of getting into debt. If you cannot afford to gamble, then it is not wise to do so.

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14. You take on high-interest loans.

If you take on a loan with a high interest rate, then it will take you longer to pay it off. You might be paying more in interest each month than you are paying on the principal, which makes it very hard to get rid of high-interest debt.

15. You have a life.

Life is expensive. Things come up. Medical issues may arise in your family, maybe something with your dear pets, losing a job, and other things. Surprises like these may lead to debt.

How are you trying to become debt free? Feel free to share in the comments.

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Michelle Schroeder

Michelle is a personal finance expert. She earns $1 million per year while sailing.

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Published on November 11, 2020

10 Best Ways to Save Money Faster and Smarter

10 Best Ways to Save Money Faster and Smarter

People love to talk about budgeting, reducing spending. and investing. But unfortunately, talk is cheap, and poor money management is expensive. It’s easy to talk about the best way to save money, but putting it into practice is a different thing.

What people need to talk about is the practical and efficient ways you can quickly save money to accomplish your goals. After all, they don’t teach this stuff in school.

Here are the 10 best ways to save money faster and smarter.

1. Cancel All Your Subscriptions

Yes, all of them.

Okay, you can keep your wifi and trash. But other than that, cancel all your monthly subscriptions for one month. You will survive, I promise. Better yet, you will realize you won’t miss all of them.

Now that you have had 30 days to examine what you really missed and what you never thought twice about, you can add some of them back in. The others? you never have to think about them again.

This is something you can and should do with every part of your life. If it’s clutter, cancel it. Being able to step back and see what is cluttering your life and what is excelling your forward helps improve your quality of life and financial standing.

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2. Automate Savings From Your Paycheck

Many of us are so excited about getting a new job that we rush through the paperwork during the hiring process. Good news for you, I have had lots of jobs so I have seen it a million times.

There is an option for a portion of your paycheck to go directly into a secondary savings account. This is by far the most effective way to save money every month. We tend to spend most of what we have. So, if we take it off the top first, then it’s less likely to be spent. Just head over to HR and ask. It will only take two minutes.

3. Cancel the Happy Hours for the Rest of the Pandemic

We are in the middle of a global pandemic, which means that there is no better time to buy some drinks from the local store and stop shelling out $5 a drink at the local cocktail bar. When we look back at our bank statements, we are always shocked that fast food and alcohol can add up so quickly. You can easily save a couple of hundred dollars just by taking this step.

A great exercise is to print out your last bank statement and highlight all the areas of alcohol and fast food. The amount may surprise you and make you think twice about that old fashion.

4. Online Grocery Shopping

Some people think online shopping increases the amount they spend. For the most part, I would agree—except for this category.

Online grocery shopping is now a no-brainer, though. Whenever you walk through a grocery store, two things always happen: you always grab impulse items, and you never know the total of your cart until you checkout. This means that we always spend more than we originally planned.

With online shopping, you can see your total as you add items to your cart. You are way less inclined to make those impulse purchases and because of that, I would venture to say that you could even pay to have them delivered to your door and still save money each month by choosing online grocery shopping.

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5. Get a Famzoo Debit Card

This is something my wife and I swear by, and it’s great for the entire family! Famzoo strictly exists to help families and kids budget their money better. Each month, my wife and I have an allotted amount loaded onto our pre-paid Famzoo debit card. This amount has changed every year depending on promotions, kids, stage of life, etc.

The important part is that when you give yourself the freedom to spend a certain amount, you are more likely to only spend the allotted amount. Think of it as a diet. If you are counting calories, you are more likely to stick close to the amount you set. You can also look for some tips online to better stick to your family budget.

6. Purge

This is actually my favorite to do, and it is actually one of the best ways to save money. Raise your hand if you have ever moved. Okay, so everyone.

When we move, we are always amazed at how much junk we have acquired. I have found that about every 6 months, I can find a couple of boxes to sell online of things that we never use. This not only gives you so extra quick cash, but it also keeps your house more tidy and organized.

Now, go clean out that garage!

7. Amazon Subscribe and Save

32! That is how many items I have setup on amazon subscribe and save. Let me explain.

This sounds expensive, I know. But it actually saves us hundreds of dollars per year! We all need toothpaste, shampoo, razors, laundry detergent, toilet paper right? This feature is truly a triple threat. When you have more than 5 items on subscribe and save, you automatically unlock the max savings for every product on your list. This can be up to 20% per item!

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Now, even better is that it ships straight to your door on the exact day you want the item, maybe monthly or maybe you only need it every 4 months. This way, you never have too much or never run out. Either way, it’s totally customizable.

Lastly, there is no contract for any items, which means you can switch brands or items at any given time at no cost. My advice: every single staple item should be on your subscribe and save.

8. Rewards

This may ruffle some feathers, but if you are using your debit card for purchases, you are missing out on free money! We have this notion that credit cards are evil but in reality, they are the same piece of plastic as your debit card.

How you use it can be bad, don’t get me wrong. But if you want my opinion though, ditch the debit card and get a rewards credit card. Use it just like you would your debit card and make sure to pay it off as soon as the statement comes in!

Just to give you an idea of how powerful this can be in terms of money, here are some things that our miles have paid for:

  • 4 nights in Vail with Flight
  • Rental car in Vail (convertible might I add)
  • Flight to Ireland
  • Flight to Hawaii
  • Multiple staycations at very nice Hotels

That’s roughly about 7 thousand dollars in travel expenses so far! Remember that the credit card is just a tool and can be one that benefits you if you use it wisely. Ironically, this can be an effective way to save money.

Pro tip: If you don’t trust yourself carrying around a credit card, then set up all your monthly bills with your credit and leave it in a drawer at home. This way, you rack up miles but don’t get tempted to overspend.

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9. Vacation With Friends

Now, I know travel is hard right now but what a perfect time to go grab an Airbnb in the woods with a couple of friends and detox from the world right now!

Vacationing alone can be pricey and get rather boring quickly, but if you split lodging and set out for a road trip, it can become affordable quickly! For a couple of hundred bucks apiece, you can have one of the most relaxing vacations ever. Don’t forget to pick up your food at the local grocery store to avoid eating out every meal!

10. Make a Budget

When is the last time you updated your budget or made one for that matter? Making a budget is like writing down your goals. If you don’t make a budget, then you will struggle to save.

How can you know if you are spending wisely if you are not tracking everything?

Our advice would be to get a finance app like Mint, Every dollar, or personal capital. All these apps are free and do a tremendous job of tracking spending and budgeting. I still am old-school and have an excel spreadsheet which I do highly recommend.

Work Smarter, Not Harder

The entire goal is to boost your bank account while reducing the effort required. Efficiency is the name of the game, and automation is the key player. Luckily, we live in a world that has more perks than we can ever take advantage of. But if I were to choose a few, it would be the ones above.

Taking on all 10 of these steps may seem a little daunting. You can first try to pick three of your favorite and start there. Saving money doesn’t have to be a chore as long. As we use the tools correctly, it can be quite effortless. And now, you have a great blueprint to get started!

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Featured photo credit: Sharon McCutcheon via unsplash.com

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