Why do we get into debt?
June 8, 2009
There is a lot of talk about debt these days, and a lot of ill-informed comment about why people get into debt. Many people that don’t have any debt seem to be very angry about anyone that does. Most people that get into debt problems are not just reckless, and some are completely blameless. Understanding why people have debt problems is key to understanding how they can be helped (or help themselves) to avoid debt problems in the future.
Reasons For Debt
Each person’s circumstances will be unique of course, but I think it is possible identify some overall categories:
1. Debt caused by events. Perhaps your finances were OK until you lost your job or faced crippling medical bills.
2. Taking on someone else’s debt. Perhaps your partner ran up large debts without telling you and/or forced you to sign for joint loans. If they managed the finances you could be liable for any debts that they run up on things like joint accounts.
3. Spending to make yourself feel better. Many people use money and spending to compensate for some other lack in their lives. This will almost always lead to financial problems and will not cure the underlying problem.
4. Spending to make other people happy. Closely related to the above point, some people believe that they can only have a relationship/friends if they lavish gifts on people.
5. Just being stupid with money. This is the category that some people seem to think all debtors fall into. It would be foolish to deny that they exist but there is usually some other reason why people behave in this way.
Curing the Disease, Not the Symptoms
A lot of information on getting out of debt seems to focus on the detail of budgeting/paying off debt etc. Although this is valuable it ignores the real root of the problem. Unless your debt problems have been caused solely by unfortunate circumstances/the actions of others then you would be well advised to try and sort out the cause of your debt/spending addiction. If you don’t it will eventually repeat itself.
Comments
Got something to say?
·