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Top 8 Reasons You Are In Debt

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More often than not, we see red when we look at our bank account balance. If you are not managing your money well, you may be scratching your head as to how you ended up in this predicament. Here are the top 8 reasons why you’re in debt!

1. Poor Money Management and Overspending

Poor money management is often the root of all the other causes, and frivolous spending does not help your case. Believe it or not, spending unnecessarily is one of the most common ways to fall into the debt spiral.

How to avoid it: Don’t be too swipe-happy with your plastic card. If you tend to spend impulsively, leave your credit card at home when you go to a mall, or anywhere you get the chance to spend money.

2. Uncontrollable Lifestyle Inflation

Lifestyle inflation happens when we increase our spending as our income grows. When lifestyle inflation gets out of hand, it is very hard for one to go back. This is all fine if your income continuously increases, but it can be crippling on your finances if your income is reduced, due to loss of job or even a demotion.

How to avoid it: Strive to live within your means, and set aside the same percentage of savings religiously. If you set a target of saving 20% of your income every month, you will be saving $500 a month, and $1,000 when you are earning $5,000.

3. Medical Expenses

Unfortunately, we have no control over unexpected accidents and sickness that may befall us anytime. We can prevent by living a healthy lifestyle, but sometimes, life can hit us in the gut when we least expect it. And you’ll be hit the hardest if you don’t have the right insurance coverage to cover it.

How to avoid it: Our best bet is to get adequate insurance coverage to protect us financially if we are hit with an illness.

4. Student Loan

Even before getting their first job, many fresh graduates have already found themselves saddled with debts, such as student loans. However, if you manage your money well from the beginning, you can make sure your student loan stays as a good debt.

How to avoid it: Settle the student loan as soon as possible. Once you’ve cleared the student loan, you will be able to focus on growing your wealth.

5. Gambling and Poor Investments

We’ve all dreamed of achieving financial freedom and not needing to work anymore, but reality, in most cases, bites. However, most people still try to take the shortcut of hitting it big by gambling recklessly and making risky investments. Many inexperienced investors who’ve entered the market hastily often find themselves getting burned.

How to avoid it: Forget the myth of easy money. There’s no shortcut to this. The more effort you put in learning how to invest and make money, the better chances that you’ll actually see the rewards of your effort.

6. Not Saving Money

Saving too little or not at all is a shortcut to debt. It only takes one unexpected event to flip your bank balance to the red. Most people live from paycheck to paycheck, and their only way of indulging is by depending on their trusty little plastic card. Credit cards should not be used to buy things you cannot afford.

How to avoid it: The simplest way to avoid unwanted debt is to prepare for unexpected expenditures. The recommended savings you should have at all times is three to six months of your monthly income. This contingency fund will see you through a job layoff or even illness, so you will not be financially strained.

7. Getting Married

Getting married is probably one of the biggest financial expenses you’ll make in your life. The average cost of a wedding can be substantial. If you are not financially prepared for it, it can be your ticket to debt-town before the last guest leaves.

How to avoid it: If you don’t have the luxury of having your parents paying for your wedding, it is best to start saving as soon as possible. By leaving it to the last minute (when you’ve met someone), you may not be able to save enough for the wedding.

8. Financial Illiteracy

Not knowing how money works and grows can be bad for your finances. Having a good job with a stable income no longer leads you to wealth. You need to know how to make the most of the money you earn through savings or investments. Our education system does not teach us how to manage our money, and most of the time we pick up our money habits from our parents.

How to avoid it: Read up as much as you can on how to manage your money. With the advent of the Internet, knowledge is literally at your fingertips. So, what’s stopping you from learning?


Sometimes getting in debt is unavoidable (like getting a home loan to buy your first property) but your debt does not have to turn bad. By planning and managing your money well, you can sidestep the debt pit without breaking a sweat.

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