6 Reasons Why You’re in Debt
Many people find themselves in debt for many reasons, and the following is a list of those top six reasons, according to entrepreneur Raphael Avraham Sternberg.
1. Inadequate knowledge of personal finances, and high-interest rates – People who lack knowledge about their finances fall into the trap of spending without knowing what they can afford to pay for and how much is left over to invest or save. Credit cards and loans with high-interest rates can quickly accumulate debt if individuals are not able to pay them off in full each month. Interest charges can add up quickly, making it difficult to pay off the debt.
2. Lack of money management and lack of a secure job – If a person doesn’t have the necessary information to manage his money, he may be too prone to spending way beyond his means, which can lead to debt spiraling out of control. If a person doesn’t have a job that offers financial stability, he may take on too much debt to keep up with his expenses.
3. Debt-driven decision-making and living beyond your means – The third reason that can lead to well-meaning individuals falling into debt is doing so because they make decisions based solely on what they think they will get out of them rather than what is best for themselves and their families in the long run. People who buy stuff they can’t afford are prone to going into debt and seeing their financial situation go from bad to worse.
4. Lack of budgeting and saving – The fourth reason people can easily find themselves in debt is that they don’t develop a budget and ensure that they stick to it unless they want to go into financial decline. A person can’t adjust to a new salary or switch jobs, which causes a lot of upheaval in his personal life, and he has no time to think about his financial situation; he will find himself in debt even before he knows it.
5. Poor money habits and bad credit history – The fifth reason people fall into debt is poor money habits such as spending more than they earn, lack of savings, and not getting a handle on their own spending. A person may be in debt if he doesn’t take care of his credit history. If he defaults on a payment, he will qualify for the list of potential debtors that companies can choose from, which can mean more offers that are more difficult to refuse.
6. Refusal to settle for less than you can afford – The sixth and final reason people find themselves in debt is that they refuse to settle for less than they can afford. They refuse to do something they feel they can’t live without, and this causes them to go into debt.
According to Raphael Avraham Sternberg, while it’s normal and understandable that people want to get the most out of what they have, going into debt will inevitably lead them down a negative financial path.
Developing better knowledge, understanding money management and budgeting, practicing proper money habits, and settling for less than what you can spend are vital in getting out of debt.