10 Reasons Why You Can’t Get Out Of Debt

Why People Stay In Debt

The problem is that we have normalized debt. Debt is so common and is associated with just about everything in our lives that we have become immune to the actual long term negative effects that debt plays.

From credit cards, car loans, after pays & payday loans we can accumulate debt with just about any purchase in life.

However, this causes most people to develop poor self-control as they can just “go buy on credit” the item they want. It also allows them to live above their means. That is until it all comes falling like a snowy mountain avalanche on them and their family.

Our saying is that debt is stupid! And it makes smart people dumb!

It really does still your future, it throws your GOALS and DREAMS so far into the future that those in debt can’t see it happening to them.

People in debt quite often cannot see a way out and the cycle of poor financial control and lack of debt awareness and the impact it’s having on their life puts them into a spin.

Here are 10 reasons why people choose to remain in debt. Don’t you make the same mistakes:

1. They aren’t willing to make any type of sacrifice

I’m telling you right now that you are going to have to give some things up in order to get your debt under control.

Can you stop eating out 5 times a month? How about not having Netflix, Stan & Prime?

Everyone wastes money differently. How will your life change without it? If you’re not willing to give anything up, you will never know. You also will never start to cut your debt down, save & create any type of wealth and financial stability for the future.

So ask yourself this question. What are you willing to give up so that you can chop your debt down like Hercules with an axe?

2. They are still trying to keep up appearances

keeping up appearances

This one is a mindset. “keeping up with the Joneses” is a dangerous way to live. did you know that the Joneses Mercedes has a large monthly repayment and a max balloon payment coming up? Their mortgage looks like an upside-down pyramid about to topple and they have more unwelcome visitors living in their spare room named VISA and MASTERCARD!

Although on the outside the Jonses look the part. They are probably the most broke on the block!

Keep up with them and you’ll most likely join them on the bankruptcy line or the pension line later in life.

So remember you need to drop the ego, and if you really want to get out of debt stop allowing people who are drowning in debt to be your role model.

3.They will not make getting debt free a priority

Some of the worst things imaginable have occured with the best of intentions. People have the best intentions but never quite get around to setting a budget. They always use the excuse of I’ll do it next month.

It’s similar to losing weight, you have to start a diet and exercise before the weight comes off. And it won’t come off in 1 week.

Paying off debt and setting up a financial budget isn’t the greatest fun in the world. But by taking control now, you can set yourself up for the future so that you can enjoy life later.

Remember, a small amount of pain now is better than the remainder of your life in pain.

It will 100% be worth it. So make it a priority today – learn how to set up a personal budget here!

4. Mortgage amount is too high

So many people have an upside-down mortgage. They upgrade through their lives as the family grows and buy a house much nicer than their needs with much higher repayments than they really can afford.

Remember affordability is more than just the ability to meet the repayment when it’s due. It’s the missed opportunity of investment and future financial security by having a repayment larger than you should have according to your incomes.

For example, a family that’s paying $3500 a month on a mortgage rather than $2500 for a slightly smaller house, that still meets their needs. If you invested that extra $1,000 a month, at the end of the 30-year mortgage you would have over $1.5 Million plus owning the property as well. That $1.5 Million can generate an income of $1500 a week for the rest of your life.

5. Poor financial knowledge

It’s a bugbear of mine that the education system isn’t set up to teach people what they need to know about business, personal finance / budgeting & investment the way that they should.

So, due to this it’s not surprising that many actually aren’t aware of the best way to run their family finances. Once they are in a poor financial situation, they aren’t sure what actions and decisions to take that will help improve their situation.

We have the debt smash method:

Debt Smash method start with smallest debt and work up

If you have debt outside your mortgage you should pay this off before you start investing.

People say to start with the highest interest rate first. But here’s why I like to start with the smallest debt first. Regardless of the interest rate.

1. It provides you with quick emotional wins. By going from 4 to 3 debts makes you feel like you have momentum and you have a better chance of continuing

2. It opens up cash flow. Once you have paid off that first debt. That’s a whole repayment you don’t have to make, you can then throw even more into the next debt to pay it off quicker.

3. It creates a consistency habit. This is important as once you have paid off the final debt it’s much easier to switch to an investing habit to grow your wealth. So, simply if you have debts and want to get ahead. lower your expenses as much as possible. Go nuts and start paying off your debts (smallest to largest). Then when you’re done with debts convert those repayments into investment contributions.

6. Their partner isn’t on the same page

Money and relationships can be difficult. What’s worse is when couples aren’t on the same page regarding their financial goals, budgeting and how their money is spent.

Financial problems and money communication is the #1 reason that couples break up. Perhaps, one of you is hell bent on becoming free from debt and financially secure. But, the other doesn’t see debt as bad and likes to go out and by nice clothes.

Having differences in a relationship can be great, because they bring different dynamics togther. This is not place to be divided in. You MUST be on the same page regarding your finances. It’s not your money or my money it’s “OUR” money. If you aren’t willing to be on the same team you’re setting yourself up for heartbreak.

So cut the crap – communicate and start a financial plan together so that you’re not working till the day you cark it.

7. They incorrectly think they don’t earn enough money

Now this might not be a popular answer, however it’s the truth.

It’s not the persons income that’s the problem, it’s their behaviour! If you are consistently spending more money than you make then it’s not rocket science that you will run out of money.

If you are consistently placing things on credit and using excuses like “I get points” then your behaviour is a problem.

You can save 20x the value of your points by having good financial discipline. Not spending the money on things you don’t need is much better than getting a very small amount of points for that purchase.

If your income is a problem, then you need to find a way to increase it. Uber driving, 2nd job, buy selling stuff on ebay / facebook etc. Just don’t sit there whining that you don’t earn enough.

8. They have not cut up their credit cards

Finally becoming debt free is an amazing feeling, but if you leave those credit cards sitting around as “Just in case” then you’re going to find that you fall back into bad habits.

Cut them up and be done with them. Follow the plan to get yourself an emergency cash buffer so that you never go back to the credit cards and debt cycle you’ve just freed yourself from.

9. They haven’t put together a budget

Failure to plan is planning to fail. Nothing is more true than when it’s about getting out of debt and becoming financially independent.

Even the best of intentions will come undone when you don’t have a financial plan / budget.

If you’re not sure where to start – go back to the debt smash method #5 on this list then go and read our article on personal budgets.

This simple method will help get your out of debt fast. Once it’s gone, remember it’s out of your life FOREVER!

It’s going to take some time, but you can do this! Lots of people chose to take control of their finances everyday so you can too!

10. They have lost all hope

When you are absolutely buried in debt and you feel the crushing weight of them against you. It’s pretty common that you can’t see the light at the end of the tunnel and feel that there’s absolutely no hope for you.

This type of feeling isn’t healthy, there is always a way out. As we have mentioned it will take a lot a sacrifice, some pain and you will need to drop your ego and not care what others think, but you can do it.

Some people are too scared to make any change. FEAR can become crippling and this is why month after month / year after year peoples financial situations go from bad to worse. Then depression, anxiety and other mental issues start to creep into their lives. This makes the entire situation even worse.

Making the change is the hardest part. If you have lived a large portion of your life using credit cards and having car loans this becomes comfortable in a strange kind of way. But, once you’ve made the change, started the debt smash and set up a financial plan / budget you will start to take control over your life and start to see that light at the end of the tunnel we have been talking about.

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Andrew Mitchell