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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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Published on November 20, 2018

The Best Ways to Save Money Even Impulsive Spenders Can Get Behind

The Best Ways to Save Money Even Impulsive Spenders Can Get Behind

The truth is, there are many “money saving guides” online, but most don’t cover the root issue for not saving.

Once I’d discovered a few key factors that allowed me to save 10k in one year, I realized why most articles couldn’t help me. The problem is that even with the right strategies you can still fail to save money. You need to have the right systems in place and the right mindset.

In this guide, I’ll cover the best ways to save money — practical yet powerful steps you can take to start saving more. It won’t be easy but with hard work, I’m confident you’ll be able to save more money–even if you’re an impulsive spender.

Why Your Past Prevents You from Saving Money

Are you constantly thinking about your financial mistakes?

If so, these thoughts are holding you back from saving.

I get it, you wish you could go back in time to avoid your financial downfalls. But dwelling over your past will only rob you from your future. Instead, reflect on your mistakes and ask yourself what lessons you can learn from them.

It wasn’t easy for me to accept that I had accumulated thousands of dollars in credit card debt. Once I did, I started heading in the right direction. Embrace your past failures and use them as an opportunity to set new financial goals.

For example, after accepting that you’re thousands of dollars in debt create a plan to be debt free in a year or two. This way when you’ll be at peace even when you get negative thoughts about your finances. Now you can focus more time on saving and less on your past financial mistakes.

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How to Effortlessly Track Your Spending

Stop manually tracking your spending.

Leverage powerful analytic tools such as Personal Capital and these money management apps to do the work for you. This tool has worked for me and has kept me motivated to why I’m saving in the first place. Once you login to your Personal Capital dashboard, you’re able to view your net worth.

When I’d first signed up with Personal Capital, I had a negative net worth, but this motivated me to save more. With this tool, you can also view your spending patterns, expenses, and how much money you’re saving.

Use your net worth as your north star to saving more. Whenever you experience financial setbacks, view how far you’ve come along. Saving money is only half the battle, being consistent is the other half.

The Truth on Why You Keep Failing

Saving money isn’t sexy. If it was, wouldn’t everyone be doing it?

Some people are natural savers, but most are impulsive spenders. Instead of denying that you’re an impulsive spender, embrace it.

Don’t try to save 60 to 70% of your income if this means you’ll live a miserable life. Saving money isn’t a race but a marathon. You’re saving for retirement and for large purchases.

If you’re currently having a hard time saving, start spending more money on nice things. This may sound counterintuitive but hear me out. Wouldn’t it be better to save $200 each month for 12 months instead of $500 for 3 months?

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Most people run into trouble because they create budgets that set them up for failure. This system won’t work for those who are frugal, but chances are they don’t need help saving. This system is for those who can’t save money and need to be rewarded for their hard work.

Only because you’re buying nice things doesn’t mean that you’ll save less. Here are some rules you should have in place:

  1. Save more than 50% of your available money (after expenses)
  2. Only buy nice things after saving
  3. Automate your savings with automatic bank transfers

These are the same rules that helped me save thousands each year while buying the latest iPhone. Focus only on items that are important to you. Remember, you can afford anything but not everything.

How to Foolproof Yourself out of Debt

Personal finance is a game. On one end, you’re earning money; and on the to other, you’re saving. But what ends up counting in the end isn’t how much you earn but how much you save. Research shows that about 60% of Americans spend more than they save.[1]

So how can you separate yourself from the 60%?

By not accumulating more debt. This way you’ll have more money to save and avoid having more financial obligations. A great way to stop accumulating debt is using cash to pay for all your transactions.

This will be challenging, depending on how reliant you are with your credit card, but it’s worth the effort. Not only will you stop accruing debt, but you’ll also be more conscious with what you buy.

For example, you’ll think twice about purchasing a new $200 headphone despite having the cash to buy them. According to a poll conducted by The CreditCards.com, 5 out of 6 Americans are impulsive spenders.[2]

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Telling yourself that you’ll have the discipline to not buy things won’t cut it. This is equal to having junk food in your fridge while trying to eat healthy–it’s only a matter of time before you slip. By using cash to make your purchases, you’ll spend less and save more.

A Proven Formula to Skyrocket Your Savings

Having proven systems in place to help you save more is important, but they’re not the best way to save money.

You can search for dozens of ways to save money, but there’ll always be a limit. Instead of spending the majority of your effort saving, look for ways to increase your income. The truth is that once you have the right systems in place, saving is easy.

What’s challenging is earning more money. There are many routes you can take to achieve this. For example, you can work long and hard at your current job to earn a raise. But there’s one problem–you’re depending on someone else to give you a raise.

Your company will have to have the budget, and you’ll have to know how to toot your own horn to get this raise. This isn’t to say that earning a raise is impossible, but things are better when you’re in control right? That’s why building a side-hustle is the best way to increase your income.

Think of your side-hustle as a part-time job doing something you enjoy. You can sell items on eBay for a profit, or design websites for small businesses. Building a side-hustle will be on the hardest things you’ll do, be too stubborn to quit.

During the early stages, you won’t be making money and that’s okay. Since you already have a source of income, you won’t be dependent on your side-hustle to pay for your expenses. Depending on how much time you invest in your side-hustle, it can one day replace your current income.

Whatever route you take, focus more on earning and save as much as possible. You have more control than you give yourself credit for.

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Transform Yourself into a Saving Money Machine

Saving money isn’t complicated but it’s one of the hardest things you’ll do.

By learning from your mistakes and rewarding yourself after saving you’ll save more. What would you do with an extra $200 or $500 each month? To some, this is life-changing money that can improve the quality of their lives.

The truth is saving money is an art. Save too much and you’ll quit, but save too little and you’ll pay for the consequences in the future. Saving money takes effort and having the right systems in place.

Imagine if you’d started saving an extra $100 this next month? Or, saved $20K in one year? Although it’s hard to imagine, this can be your reality if you follow the principles covered in this guide.

Take a moment to brainstorm which goals you’d be able to reach if you had extra money each month. Use these goals as motivation to help you stay on track on your journey to saving more. If I was able to save thousands of dollars with little guidance, imagine what you’ll be able to do.

What are you waiting for? Go and start saving money, the sky is your limit.

Featured photo credit: rawpixel via unsplash.com

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