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Why do people stay in debt?

Nobody wants to stay in debt right? The stress, financial pressure, and burden of having to keep moving all your income towards your debt can get extremely overwhelming. Unfortunately, there are some people who are stuck in the vicious cycle of debt.

Here Are A Few Reasons Why People Stay In Debt.

Spending Your Paycheck

What’s the first thing you do when you get your paycheck? Most people will set aside some funds to their upcoming bills, transfer some money into their savings account and then set aside a  portion towards their spending.

If you’re in debt and you spend your entire paycheck on a night out; it may be time to reconsider your financial situation. Living on a week to week basis is not sustainable. Spending your paycheck on a week to week basis will only result in debt misery.

Lack Of Sacrifice

Which do you prefer? Missing your electricity bill or a two night getaway at the intercontinental hotel? You will be surprised to know that many people in debt may still choose the weekend getaway.

The trick to getting out of debt is sacrifice. If you’re in a lot of debt, you must be willing to make lifestyle sacrifices so that you can free yourself from your complicated financial situation. Before you make any lavish purchases, ask yourself “do I really need this? Can I make do without it?” If the answer is no, then you should save that money or use it to pay off any bills.

Addiction To Debt

An addiction to debt is all around us. In today’s somewhat materialistic driven society, consumers are driven by a need to have the latest and most tech-savvy gadgets, even if it means putting a massive dent on your finances. With the introduction of buy now pay later services such as Afterpay, it has become even easier for consumers to spiral into a pit of debt.

Unfortunately, this culture of overspending is everywhere. Millennials will spend all their savings on a holiday to Europe. A $40 000 car is only possible because they can meet the minimum monthly repayments. A $2000 iPhone is considered a bargain because you only end up paying $110 a month with your phone plan.

The truth is that we are becoming used to spending the bare minimum on anything and everything, regardless of the outcome. This approach of spending more than you earn is one of the main reasons that Australian have a higher debt to income ratio.

The Non-Existent Budget

If you’re spending more than you can afford, you must stop, take a step back and assess whether you can actually afford this purchase in the long run. If you knew the outcome that a $1000 pair of shoes will have on your finances in 3 months, will you still buy them? Budgeting plays a large role in learning how to manage and keep track of your finances. A budgeting calculator can help you to categorise and visual all your income and expenses.  At the same time, a budget can structure your spending so that you know what you need and when you can reward yourself.

Setting a budget is designed to help you create smart long term money habits so that when you are debt-free, you can continue to build a strong financial future. Check out our budgeting calculator to help you get started.

All Hope Is Gone

For some, the fear of recovering from debt can actually make things worse. Debt is exhausting. Sometimes you may feel like you are stuck in a cycle and there’s just no way out. You become so used to making the minimum monthly repayments that saving seems practically impossible.

At some point, this cycle may become too normal. If you’re used to having multiple credit cards, car repayments and personal loans then it can become hard to let them all go. It is important to remember that regardless of how bad your finances are, there are always options to help you get back on top.

Credit Cards Are Piling Up

If you’re still in debt, it may be time to start cutting up your credit cards. There’s no need to save your credit card for an emergency. This will only land you back in debt. Call your credit card provider and cancel that card. Grab a pair of scissors and cut them up. With budgeting and mental focus, you won’t need to worry about using your credit card for an emergency fund.

Partner Is Not On The Same Page

Relationships can be complicated, especially when two people are on different wavelengths. If for example, you are motivated to save but your partner is too busy buying luxury watches, it can get messy.

Regardless of who is spending what; it is important to understand that your finances are not just yours – they are “our” finances. Being in a marriage, for example, means that any debt must be shared between both partners. Assuming shared responsibility is critical to getting out of debt. It all starts with a mindset that this, not a solo journey; it is one that you must take together.

Debt Consolidation Is Available

Paying off debt may sound impossible, but it is not. A big debt can restrict you from enjoying life and it can raise your stress levels through the roof. It does not always have to be like this though. There are many services out there that can help you simplify your finances.

Debt consolidation is a great way of merging your debts into one neat and tidy loan package. Pay one loan with one repayment in a flexible term. Debt consolidation can help you learn how to manage your finances and get you moving forward. Apply online. It only takes a matter of minutes.

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