Why are we always in debt?

Nowadays, it is very easy for young individuals to be saddled by debt as most spenders have little idea of how much their purchase really cost especially if they use credit cards. In his book, Debt-Free Living: How to Get Out of  Debt by Larry Burkett, he offers three (3) personal traits that lead to debt problems:

First it’s because of ignorance. The ignorance here refers to a lack of understanding about the true nature of one’s financial situation, and sometimes a kind of “living in a dream world” approach to financial matters. False perceptions of what can be handled can get us in trouble, especially during big spending times such as Christmas Season.

Second is indulgence.

 This must obviously be one of the worse downfalls of a “fast food” society that believes they should always “have it your way” and “get it in thirty minutes or less.” We have trained ourselves not to wait if we don’t have to, and we often and easily give in to the need for immediate gratification. Young individuals want to buy electronic gadgets nowadays under the mindset of charging it now and pay later. In the past, we have our parents telling us that if we want to buy something, we have to save up first and then when we have the full amount, that’s the time, we can buy it. But because of zero down payment and/or zero interests lay away plans, we can certainly have it now and save for it later.  

And finally,

poorplanning. Poor financial planning can lead to overspending and deeper debt. People should take responsibility for their own financial affairs. People fail to plan because they may feel they do not have enough income or financial assets to consider planning. They may be reluctant to consider some of the less pleasant aspects of planning such as thinking about death, disability, change of circumstances such as loss of job, illness, etc. They have the tendency to procrastinate.

So one may ask, why do we find it so hard to live within our means?

It could be summed up in four (4) factors:

(1) impulsive buying – we buy now what we want, when we see it, regardless, we need it or not, most especially when an item is marked “Sale;”

(2) comparison with others or trying to own the same things as people you know in order to seem as good as them or what is commonly called – “keeping up with the Joneses;”

(3) wrong priorities – inability to identify between need and want;

(4) misplaced values – incapability to distinguish necessity and luxury

To date, I know a lot of friends, associates and even former office mates who fell in the so called “debt-trap” and until now paying for it.

In essence, the two (2) most important reasons for debt problems with today’s ordinary people are first, too much availability and easy access of credit and second, compulsive and irresponsible spending.

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