Why People Stay in Debt

Chained to DebtIn a previous post I covered the subject of how people get into debt. But here’s the next logical question:

Why do they stay in debt?

I’ve been thinking about this question a lot because I’m already in debt and I’m now trying to get out. The trouble is, I sometimes resist reducing my debt. Why would this be?

As I’ve thought about this question, I’ve come up with five basic reasons why people stay in debt after they’ve accumulated it.

Reason #1: Unwillingness to change the behavior that created the debt in the first place.

All people who are in debt have at some point lived beyond their means. They earned one dollar; they spent two. When debtors finally make the decision to get out of debt, it requires that they live below their means.

This is quite painful for some people.

The female who’s in love with fashion can’t stop buying new clothes at her favorite stores. The white collar worker can’t give up his $15 lunches with the guys. The newly married couple can’t imagine selling their brand new car to get a cheaper one.

And so on.

Every person’s “stumbling block” is different. Determine what yours is so you can work through your emotions and actually change your behavior. Pray and ask God for strength to help you change.

Reason #2: Inability to earn enough money to pay down debt, even after eliminating expenses.

Assuming a person has already cut back their expenses as much as possible, and minimum payments are being made, it is possible that an inability to increase income is preventing the repayment of debt.

Granted, minimum payments will eventually pay off a loan balance… but it could take decades. Realistically, you will need to make more than the minimum payment on one account to get the ball rolling in your favor.

If your income and expenses are in a dead heat with each other… and you can’t seem to be able to earn any more… it’s time to hit the books. Upgrade your skills (so you can qualify for a new position or job), learn a new skill (so you can make a little extra “moonlighting”), or consider starting a part-time business venture.

More importantly, adopt the attitude: whatever it takes.

Reason #3: Drawing self-worth from possessions; inability to separate identity from possessions.

Another reason people may stay in debt is because they have tied their self-worth to their possessions. They got so busy “keeping up with the Joneses” that they became Joneses themselves.

This self-worth problem is usually attached to larger purchases like cars and homes. Someone with a Mercedes may feel like less of a person if they trade down for a Honda. Or a person with a McMansion may be embarrassed living in a modest two-story.

Ultimately, it all boils down to ego.

We all want to feel important. We all crave the praise of men. It is important to get perspective on this. And a great way to do that is to remember Solomon’s words:

A man’s pride brings him low, but a man of lowly spirit gains honor. (Proverbs 29:23)

Reason #4: Can’t imagine life would be any better without debt.

Have you ever tried to justify your debt by saying, “It’s not that bad”? I know I have.

I think it comes from thinking debt is natural… or not being able to imagine that life would be any better without debt.

Truth is, I can hardly remember what it was like living without debt. It was so long ago. (I do remember how our bank account was always growing larger without even trying.)

To overcome this obstacle to debt reduction, take some time to imagine how much better your life would be without debt. Imagine how much less stress you’d have… how much more disposable income you’d enjoy each month. Build the vision so it motivates you to take consistent action toward repaying your debt.

Reason #5: Hopelessness; a feeling that circumstances are what they are, and that they will never change.

The final reason a person may stay in debt is because of a feeling of hopelessness. This hopelessness could be caused by many things: an enormous amount of debt, a feeling of overwhelm, not knowing where to start, not being able to see the light at the end of the tunnel, etc.

If you feel this way, perhaps it would help to run your numbers to see when you could pay off your debt, if you had a plan and stuck to it. Or perhaps you need to talk to somebody about your circumstance or be encouraged by somebody who has already become debt free. Or perhaps the best thing for you would be to talk with a debt counselor so you can work out some kind of repayment plan.

What’s next?

As you read this article, did you resonate or identify with any of the reasons why people stay in debt? If so, now you know what you’re up against.

Begin to make a plan for breaking through your emotional barriers and finally doing what you know you should do, which is: repaying your debt. All of it.

[What do YOU think? Why have you stayed in debt? What challenges do you face? Leave a comment below. Thanks!]

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13 thoughts on “Why People Stay in Debt”

  1. Pingback: Everything Finance
  2. I’ve actually managed to go back and forth between a few of these over time. I think it all really depends on how much you deceive yourself when you ask yourself how you’re doing. The biggest one we struggle with is the behavior changes. Once a luxury is tried it becomes a “necessity” almost overnight.

  3. Mr. Debtbeater – I like what you said: “Once a luxury is tried it becomes a necessity almost overnight.” Very true. It’s easy to scale up, difficult to scale down.

    And thanks for including me in your Carnival summary!

  4. It seems like a daily stuggle to stay ahead of debt. Unfortunately you can’t really take a day off and splurge. Our credit card debt occurred during our honeymoon. What a way to start. It was a long road back. But since then, my student loans are paid off, our car is paid off and now we are attacking paying down our mortgage. There is light at the end of the tunnel!

  5. Sue – I agree, it is a daily struggle that requires you to be diligent and constantly alert.

    That’s great news that you’ve made so much progress. Good for you! It’s encouraging to hear from people like you who have made more progress than I have.

  6. The sad thing is I am the verge of going a little further in debt because our three year lease on our minivan is up in May. Dreading the thought of another a payment. We did budget the car payment (subtract $240 per month for another lease out of our current debt snowball going toward our mortgage).
    We paid off the lease in about 8 months then used that payment to add to our snowball.

  7. I guess cars are one of those expenses that are hard to avoid. We bought a new minivan last June. We keep cars for a long time (I’ve had my Elantra for seven years), so we’ll probably just pay it off rather than sell it to get a cheaper van.

    But who knows? I don’t know what will happen tomorrow, much less six months or a year from now. :-)

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