Banking » Savings » Why People Stay In Debt? Look at These 9 Reasons
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Why People Stay In Debt? Look at These 9 Reasons

Getting into debt is easy, but pay it off is much more difficult. Here are the top 9 reasons why people stay in debt - in spite of they know it can be harmful.
Author: Baruch Mann (Silvermann)
Baruch Mann (Silvermann)

Writer, Contributor


Baruch Silvermann is a financial expert, experienced analyst, and founder of The Smart Investor.  Silvermann has contributed to Yahoo Finance and cited as an authoritative source in financial outlets like Forbes, Business Insider, CNBC Select, CNET, Bankrate, Fox Business, The Street, and more.
Interest Rates Last Update: April 15, 2024
The banking product interest rates, including savings, CDs, and money market, are accurate as of this date.
Author: Baruch Mann (Silvermann)
Baruch Mann (Silvermann)

Writer, Contributor


Baruch Silvermann is a financial expert, experienced analyst, and founder of The Smart Investor.  Silvermann has contributed to Yahoo Finance and cited as an authoritative source in financial outlets like Forbes, Business Insider, CNBC Select, CNET, Bankrate, Fox Business, The Street, and more.
Interest Rates Last Update: April 15, 2024

The banking product interest rates, including savings, CDs, and money market, are accurate as of this date.

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Table Of Content

Debts are something that most Americans spend a whole lot of their time trying to fix. Fees will accrue every month and when you make that minimum payment it doesn’t help much.

The expenses you pay toward the card makes a very small impact on the card and it takes you a whole lot of months to get anywhere. That means you’re missing out on something else when you have to make those payments. But why do we do it? Why do we stay in debt when we know how difficult it is?

A majority of Americans have a plan to reduce their personal debts within specific timelines, based on a poll conducted by Northwestern Mutual


The unfortunate thing about debt is that as many as 40% of people say they couldn’t come up with $400 for an unexpected expense. That means they don’t have $400 in any kind of liquid account and would have to borrow money from someone or sell something.

The Negative Effects of Debt

Being in debt can have an impact on your goals. When you are living paycheck to paycheck, that trip to see friends or the house you want to buy are simply out of reach.

  • Credit Score Reduction – Being in debt can have a negative impact on your credit score. It's a never-ending cycle. A high level of debt can contribute to a low credit score. A low credit score affects your ability to obtain low-interest loans. A higher interest rate on a loan reduces your available cash flow. Having bad credit can also make it difficult to get a job or rent an apartment or house.
  • Influence your personal relationships – Being in debt can also have an impact on your personal relationships. It can lead to marital problems, disagreements with children, and the loss of friendships. When someone is feeling deprived, he or she may look for someone to blame. If your family is in debt, remember that you are all in this together, and it is critical that you work together to find solutions to cut non-essential spending and pay down debt.
  • Influence Your Job – If you have a lot of debt, you may be forced to stay in a job you despise in order to make your monthly payments on time. It can be very discouraging because you start to feel trapped by the debt because it may limit your options. In addition, some jobs require a credit check. This is usually part of the interview process, but depending on the field you work in, it can make or break your ability to find work.
  • Stress – Stress can be caused by bad debt because it limits your ability to enjoy life. Stress can increase and take years off your life if you don't have a system in place to manage your loans and pay off credit card debt. The stress of being in too much debt can result in illness and depression. It can have a significant impact on your ability to be happy and stress-free. It can have an impact on how well you sleep and how well you perform at work.

How to Stay Positive When You Are In Debt?

If you are in debt, it can be difficult to remain positive, which can easily compromise your motivation to stick to your new financial plans.

So, it is important to recognize that getting out of debt is not a quick fix solution. Therefore, you need to think about including some treats into your monthly budget. For example, treating yourself to a fancy cup of coffee or a take out once a month could be enough to help you stay on track and remain feeling positive.

1. No Budget or Spending Pattern Records

If you don’t budget you’re going to have a hard time figuring out how to spend your money. You won’t be able to allocate any money that comes in on schedule or anything that comes in unexpectedly. What ends up happening from there, is that people have to use debt to get through the month. Not having cash on hand is no problem, because you can pull out a credit card. Not having a plan, however, means that you’re going to struggle to figure out how to pay back debts as well.

Monitor your finances to find out where you’re spending and how to save. You have to make sure that you don’t take on too much debt. You also want to think about what your goals are moving forward.

Track what you’re doing with your money to know what’s happening with your financial situation. Also, track your goals and your spending. Whether you use an app on your phone, a notebook and pen or a spreadsheet, you want to keep everything written down.

2. No Knowledge of Finance

Many people struggle with debt because they just don’t understand finance. They don’t know how to make the decisions that it takes to advance their finances. As a result, they end up using their credit cards too much or they take out loans that have high-interest rates. They’re completely unaware of things like:

The Snowball Method

To use this technique you start with the credit card you have with the smallest balance, and then you pay it off. Once you’ve done that you switch the money to the next smallest balance account.

So, you take that smallest balance and you pay as much extra money as you possibly can to that account. Make sure you still make at least minimum payments toward the other cards. Missing payments will only make things worse.

Now, once you’ve paid off that first card entirely you start the next one. It should be the new card with the lowest balance. You now put all of the money you have extra toward that balance. With this method, you’re going to pay off your cards earlier than you would otherwise. It also gives you more motivation as you see the cards dropping quickly.

The Avalanche Method

Here you’re going to start with the debt on the card with the highest interest rate.

When you make a payment to a credit card company you’re paying them a lot in interest. If you can cut down on that interest you’re going to cut down on how long you’re in debt and how much you pay. If you want to pay things off fast you’ll want to pay this way.

Pay as much as you can onto this card and still pay the minimum for the other cards. You’ll need to stay very focused and self-motivated for this method. You won’t see as big of a difference in your debt as quickly with this option.

For this version, as soon as you finish paying off the first card you go to the next one with the highest interest rate. You will continue this, again and again, to pay off everything you have.

You don’t have to pick one or the other. You get to decide which one works for you. You can even choose a slightly combined approach if you want to. The key is to pick one that you can stick to.

3. Don’t Want to Make Sacrifices

If you don’t want to make sacrifices you’re going to have a hard time paying debt. The more sacrifices you’re willing to make the faster you can pay your debt off. Know that instant gratification may feel great, but it’s not going to happen all the time.

We live in a world that says we can have whatever we want, whenever we want it. Spending more and saving less is the norm. But changing that is crucial to being able to pay off the debt.

4. Can't Grow Your Money

It’s impossible to invest if you don’t have money. Even still, you need a way to make your money work for you. That means you must save some of your money and invest it to make more money.

High yield savings accounts, stocks, real estate and more are important ways to make some more money. They give you the opportunity to invest and make more money for yourself. Then you don’t have to do anything.

5. Only One Source of Income

Most people have a single form of income that they base everything off of.

If you get too much debt that means you end up paying far too much each month. You end up paying toward interest and fees, which makes it difficult to pay down the debt. Plus, you have a lot of different expenses each month. You have to pay rent, insurance, childcare and utilities and that doesn’t leave a lot of extra.

The most important thing is to have some type of side hustle to help you pay down the debt. It’s going to give you a little extra money every month to put toward your debt. From there, you can even build up a full business, which gives you an even better side amount to put toward your debt.

6. Too High Mortgage

A mortgage that’s too high can become an anchor easily.

Often, banks will approve someone for a very large mortgage. Then, they want to charge you a whole lot of interest on top of it. Keep in mind that the larger the loan the more you’ll pay every month. If you decide to go too far with the expense you may be in trouble. That means if there’s any kind of problem in your future you could end up overwhelmed.

Pay attention to your mortgage and if it’s too much look for a way to downsize. You may be able to get a smaller house, rent a place or get a roommate to help you out. Take a look at a mortgage calculator for an estimate on what you can afford.

7. Maxing Your Cards And Only Paying the Smallest Amount

The first problem is that many people max out their credit cards. From there, it becomes difficult to pay off the balance. You also don’t have a plan for unexpected expenses. You could be in trouble when you have to pay for those things.

On top of that, you’re going to increase your credit utilization score. That’s going to mean a lower credit score overall. It’s also going to mean a whole lot of additional problems when you try to use that credit score for anything else in the future.

From there, if you only make the minimum payment you are going to be stuck in debt. If you owe $10,000 and have a 17.5% interest rate and only have to pay 2.5% of the minimum that means $250. But it will take you over 5 years to pay off the $10,000. Plus, that means you have to keep from adding new debt to the amount that you owe while you’re at it. That’s going to make it extremely difficult to achieve anything.

8. Being Underemployed or Unemployed

Many people lose jobs and this causes them to fall into debt. For those who find themselves in debt while working, losing a job can be a catastrophe. It becomes nearly impossible to make the same payments on debt.

Not only that, there are generally new expenses that need to be paid. This means more interest and fees continue to be tacked on. While you’re trying to get a new job, you find yourself struggling to pay off those cards or even pay them down. Even if you can find another job you find that you have much higher credit card balances.

If you are underemployed you may also find yourself struggling. If you have a small paycheck or few hours you may not be able to pay more than the minimum.

If that happens you start to depend on your credit cards. This helps to push you through until you get more money. On the other hand, it increases your balance dramatically. The problem with that is you end up in debt even longer. You struggle to make the payments that you need just to stay afloat, let alone actually get ahead.

9. Paying Late

When you make a late payment you get charged a fee. That fee seems small at the moment, but it only gets larger. If you’re late multiple times you can end up with even larger fees and interest rates. They also continue to add up over time.

If you get a higher interest rate as a result of that late payment that only makes it worse. When you think about the fact that you could have multiple late cards at once you end up even worse. For example, you could have up to $37 per card for a single late month. That could mean hundreds of dollars in added charges.

If you weren’t paying your credit cards late you would be able to use that extra money to pay something down.

That means you could end up falling behind and you could have some struggles in the end. So, what are you going to do? How are you going to fix your debt and fix the common mistakes that so many people are making about their debt?

If you struggle to make your payment on time you should make sure you use automatic payments. This can make sure everything is paid on time and you won’t be struggling with late fees.

How To Get Out Of Debt?

Getting out of debt is not an easy task – but its principles are simple. Here are the main things you should take care of:

  • Don't Take Out a Loan – It takes time to get out of debt and build your credit, but you can speed up the process if you're willing to make some changes. That means you can't get another credit card and you can't keep spending money on credit to get things you want. If you do these things, you will be able to reduce your debt because you will have more money to put toward it.
  • Spending Cuts – Everyone desires certain things. It normalizes us. However, far too many people decide to buy things they want even when they don't have the money to do so. People want to buy what they want when they want it, and even millionaires can struggle with this. The best thing you can do is to avoid purchasing new items unless you can afford to pay for them in full.
  • Make a Budget – okay, so you'll need to make a budget first, but that budget will be useful in tracking your spending and income. You'll be able to determine where you are right now so that you can keep moving forward in a positive direction.
    The key is to determine whether you have a surplus or a deficit at the end of the month. That is, whether you have money left over or if you spend more than you earn,
  • Set Long & Short Term Savings Goals – Setting savings goals, especially if you plan to splurge on a major event – whether it's a vacation, retirement, or a wedding – is a simple yet effective measure because it gives you something to strive for. Another approach is to divide your objectives into short-term and long-term goals, allowing you to track your progress on multiple levels. Short-term goals, such as purchasing a new vehicle, typically take one to three years to complete. The latter refers to long-term investments, such as a down payment on a house or saving for your children's education.

Who Can Help With Debt?

There are a number of organizations that can help you with debt. Many of these organizations such as work with credit counselors to help consumers struggling with debt issues. There are also debt relief companies who can assist with debt restructuring and settlement programs.

These companies tend to charge a fee, but they can often help you to negotiate with your creditors to alleviate debt pressure and stress. However, it is important to choose the right debt relief company as many companies will only work with certain types of debt.

Finally, don’t overlook actually speaking to your creditors. Most financial institutions have departments to assist their customers in financial distress. If you are struggling with arrears or making your regular payments, your lender or bank may be able to offer a repayment plan, interest freeze or other measures that will help you to get back on track.


If you want to get out of debt in a year, you will need to implement a budget immediately. This will allow you to ensure that you keep track of your finances and cover all of your expenses. You can allocate an affordable amount to pay down your debt each month.

The next step is to work out which debt is more pressing. Look at the rates on your debt and concentrate on paying down the account with the highest rate first. This will allow you to pay less on interest charges and more on your actual debt. Of course, you will need to continue servicing your other accounts, but once you’ve cleared the highest rate account, you’ll then have far more to pay down the next highest rate account.

The best way to avoid debt is to implement a budget and ensure you stick to it. Unless you are aware of where your money is going each month, you are unlikely to remain in full control of your finances. So, if you want to avoid debt, you should take some time to create a budget.

Fortunately, this is quite simple. All you need to do is calculate your typical monthly income and then work out your expenses. You can then categorize your expenses as essential or discretionary. Once you allocate money for each category of spending, you will know that you only have $200 per month for clothing or $400 for food etc.

For many people, debt is a way of life. After all, most people have debt in some form or another. However, it is important to be aware of the consequences of debt.

The main consequence of debt is that it will impact your financial future. If you’re carrying debt, you will struggle to obtain a car loan if you want to change your vehicle or even get mortgage approval when you want to buy your own home.

However, there are other consequences of debt, such as you are likely to pay more for your vehicle insurance and other financial products. Insurers tend to run your credit as a factor when determining your risk profile and therefore your rates.

Most people acknowledge that college can become extremely costly, but there are ways to help you stay out of debt while getting your education.

If you can budget and save as much as possible before you enroll, you can minimize your student loan debt. Your choice of school can also impact your potential debt. Graduates of in state schools typically have 20 percent less debt compared to those who graduate from a private non profit college. There are also grants and scholarships that can help you to reduce your college debt.

Finally, work while you’re in school. It is possible to work part time during terms and then full time in the summer break to build your college fund. Additionally, if you’re working under the Federal Work Study program, the income will not be included in your FAFSA application.

While it is possible to give your consent for organizations to check your credit report, these usually relate to credit applications. You may be able to access assistance for checking your credit report, but it may be simpler to request a copy and check the details for yourself. You are more likely to be able to spot any errors, since you will be more familiar with your personal and financial details.

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Picture of Baruch Mann (Silvermann)

Baruch Mann (Silvermann)

Baruch Silvermann is a financial expert, experienced analyst, and founder of The Smart Investor.  Silvermann has contributed to Yahoo Finance and cited as an authoritative source in financial outlets like Forbes, Business Insider, CNBC Select, CNET, Bankrate, Fox Business, The Street, and more.
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