5 Reasons You Have Debt (And How to Avoid Them)

Have you ever wondered why consumers remain in constant debt? We buy things we don’t need, and often fail to accurately assess how much money we really have. While we probably know that we are doing these things, it’s not until we see the figures on paper that we feel reality set in. 

Here are the top 5 reasons that you continue to have a credit card debt, personal debt or any other kind of debt - and how you can face up to your debts to start clearing them.

5. We earn X per day, but spend Y

Use a pay calculator to find your monthly salary, divide it by the number of working days in the month and find out how much money you make on a daily basis after tax. 

For the majority of us, this daily amount won’t be an extravagant figure. Once you factor in lunch, transport fares, coffee and other expenditure, you’ll quickly see the importance of every dollar. 

As consumers, one of the biggest reasons we remain in debt is that we end up living to work, instead of working to live. Do you really want to spend all that money on a work day when it’s chipping away at your savings? Create a budget plan and develop new strategies to ensure you save as much as possible during your working week. 


4. We focus on what we want, not what we have

Consumers, by definition, buy things we don’t necessarily need. Instead, we buy things that we simply want, for a wide variety of personal reasons. If you can stop pouring your attention, and money, into clothes, cars, fast food and other easy ways to spend, you can focus on the value of clothes you already have, the car you already own and the food you already have in the cupboard.

3. We use our credit cards at the expense of rational thinking

Swiping a credit card obviously puts you in debt - another thing it does is disconnect you from the reality of your finances. Money becomes something that isn’t real, it’s just a number that you vaguely recognise and you either have enough to buy what you want or don’t. 

Try and reconnect with your money by only using physical cash for a while. You’ll find that parting with a $20 note is much harder than just casually swiping away on your card, and doing so will give you a better sense of what you are spending. 

If you’ve already set yourself a daily budget, try to carry the amount in cash for a few weeks to ingrain this mindset. If you can only spend $20 each day, only carry $20 in cash. You’ll be amazed at how resistant you are to spending urges.

2. We have no clue about expenses, their amount and their due date

You might have a mortgage, Netflix or Foxtel bill, a phone bill, an Internet bill - but do you know exactly how much they really cost as a total? Do you know the exact figure to be deducted from your bank account each week, fortnight, or month? 

Calculate your total expenses by setting up a direct debit account that is solely used for recurring expenses. After a month or so, you will quickly see the stand-alone expense transactions and it will help you calculate what you pay on any given month. 

To further help with managing your bills, you can read our guide on how to set up bill reminders to never get a late-fee or penalty again.

1. We have no budget and no focus on repaying debt

The number one reason we often remain in debt is because we simply aren’t motivated to make a change. Committing to saving money isn’t an easy task - it requires great planning, dedication to saving every dollar possible, and having the ability to track all of this quickly and easily. 

If you’re serious about getting out of debt, identifying spending leaks and finding ways to save money - you can use our free Money.com.au Budget Planner Spreadsheet. We’ve created a helpful, approachable guide that will walk you through the steps on how to evaluate your actual income and expenditure, and make significant changes to your finances.