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.
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.
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.
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.
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.