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6 Reasons People Go Into Debt


Have you ever wondered what causes people to fall into debt? Maybe you are one who is struggling to get out of the grasp that debt has on you. Or perhaps you are one of the few that has been lucky to get by without signing their life away. I am a firm believer that you should avoid debt at all costs, but it isn’t always that easy, is it? Yet, as most of us know from experience, going into debt often happens by surprise. What is it that causes people to go into debt? If we can understand the reasons or factors that lead someone to go into debt, it might be possible to avoid it.

Reasons People Go into Debt

Poor Financial Planning: While perhaps the most cliche, poor financial planning is a popular contributor to going into debt. If my wife and I fail to examine how much we are making, how much we are spending on necessary items like housing, transportation, food, etc., it will be easy for us to overspend our income. Not knowing where you stand financially can lead to false assumptions of financial security, when in reality you are spending away that hard-earned money.

Inability to Resist Impulse Purchases: Have you ever known someone that just can’t say no to a discounted item? As a result of overwhelming advertising, many people just make mistake after mistake that leads up to their financial demise. Do you walk through the grocery store and tell yourself that you have to have this or that? If so, it may be a sign that you have little control over your spending. If this is the case, I’d recommend staying away from popular electronic stores, like apple. My wife and I had to go there to replace our wireless keyboard and we had to put on our “blinders” to keep ourselves from walking out with a new laptop or accessories.

Trying to “Keep Up” with an Image: This cause of going into debt is often talked about on financial blogs as trying to keep up with the Joneses. The idea is that the people you come into contact have a nice car or house and you feel like you have to have the same things even if it means financial disaster. Before you deny that this affects you, think about whether you buy certain things just for the name.

While I know I am guilty of this from time to time, my brother and sister-in-law offer a better example of how this can lead to debt. They were struggling financially when the housing market crashed and their variable rate mortgage forced their monthly payments to shoot up. Yet, they also have a spending problem. Despite their financial instability, they continue to buy the latest gadgets. One day it a was a new iPhone, the next it was an I-Pad. In the most recent conversation, the next purchase is… you probably guessed it, a Macbook Pro. It’s this mentality that often leads people to finance a car that they can’t afford. What is unfortunate with American consumerism is that it is driven by the subliminal message that you can buy happiness with these items, whereas the reality is financial ruin.

Lack of Emergency Fund: It is easy to buy into the belief that you are financially secure and do not need any safety net. If you have a job with a nice salary and benefits, it is hard to think that something bad could happen. Buying into this assumption leads many to live without any financial reserves. Unfortunately when something bad happens like loss of job or a car breaking down, the only immediate answer is credit. Without a proper emergency fund, it is easy for even the smallest of expenses to push you into debt.

Emergency: While most of my reasons for people going into debt focus around irresponsibility, it would would be inaccurate to suggest that it always results from this. Truth be told, more people are forced into debt as a result of some major emergency. Whether it is a medical emergency that your insurance does not cover or some sort of natural disaster, bad things happen. In a matter of days, all sense of financial security can be wiped away and you can’t do a single thing to change it. Granted, there are things to do to try and protect yourself from these worst-case scenarios, but it’s not always full proof.

Investment: While there are lots of other reasons that people go into debt, another popular one is the belief that if it is an investment, it is okay. There is a rumor of there being such a thing as “good debt”. If you were to ask me, this only pushes people to accept that debt in general is okay. This idea of going into debt as an investment is often used to justify college debt because you are investing in your future. You may increase your future earnings and see a return on your “investment,” but there are ways to pay for college without going into debt. While there may be situations where going into debt has paid off for people, as a general rule, it puts you in a financial unstable position because you never know what is going to happen next.

What are other reasons that people go into debt?

This was written by Corey, a staff writer from 20’s Finances and Passive Income to Retire. He writes about his personal finances in order to inspire others to take charge of their lives and reach their financial goals.

Get Out of Debt Money


My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.


  1. So so true. I know someone who tries to keep up with the image and it’s killing him.

    • Thanks Jai. Yes, it’s so hard to watch someone do that to themselves, if you ask me.

  2. These are all reasons that people go into debt. I am currently in the process of digging out so I can identify.

    • Thanks CFM. If you continue the way that you are with your online ventures, I’d bet you will be out of debt soon enough.

  3. The emergency fund is so important. For a long time, I didn’t see the value, but now I’m a firm believer in at least 6months living expenses tucked away in a savings account. Sleep better that way!

    • Thanks BE. Yes, there’s no way I would live without it now that I have it. It may be hard for some to save it up and not spend it on everyday expenses, but it is worth it in my book.

  4. Nice list. I’ve fallen into a few of these categories over the years. I guess the important first step is being able to recognize it when it’s happening.

    I think another category that might be more prevalent these days is, “it doesn’t cost much to borrow money on a LOC or Homeline LOC, so I can use that as an emergency fun.” That mentality can quickly get out of control.

    • You’re right – Recognizing that it is happening is so important.

  5. All of these revolve around the first one. If you don’t understand the relationship between the money that comes in and the money that goes out, your destined to end up in debt. You don’t need to be a financial expert to get this, but knowing and doing are not the same thing!

    • Thanks for that bit of insight Kris – I think I agree. It sounds simple, but is hard for many to follow through.

  6. all of the above… guilty x 6.

    i think that our income was enough that we were allowed to skate by without any real financial planning, with only racking up a few thousand of credit card debt…

    when a few emergencies happened and our income situation changed.. things got ugly quickly, which pushed the need for real change.

    • That seems to be the trend. That is why earning too much money can be a curse if you don’t direct it towards something right away like savings goals or investments.

  7. This is all very true. I would say that my inability to resist purchases is what hurts me.

    • Yeah, it can be difficult at times. I have found that it is easy to resist when I have something positive to direct the money towards like a savings goal.

  8. I think the biggest reason people go into debt is lack of concern over the consequences. Whether it is the inability to control oneself or something else. The consequences of debt limit your choices in life.

    • That may be – I have managed to stay out of it because I know the consequences.

  9. Outside of our debt on our house, we have none. That is comforting, but we live in an old house with many possibilities of big ticket items breaking. We are also working on our savings account to be sure we can weather a storm. Thanks for the article and sharing some valuable information.

    • You’re welcome Kevin. It sounds like you are in good shape too.

  10. I think lack of financial planning, lack of emergency fund, and emergency are all closely related — and those are big reasons for sure.

    • Very true Jackie. There seems to be a trend there.

  11. The image hits the nail on the head for a lot of people that I know. Sooner or later that lifestyle catches up.

    • Thanks – It’s a harsh reality, but it seems to be just that – a reality.

  12. I can agree with each and every one of these reasons. But they all eventually come back to one “Poor Planning”. There are very few things proper planning can not prevent and staying out of debt is not one of them!

    • I couldn’t have said it better myself. 🙂

  13. I think another reason people go into debt is lack of knowledge. Some parent teach their children about checking/savings and credit at a early age. Some learn the hard way and its a little late. Add that to the reasons you mentioned and you have a recipe for disaster.

    • Very true. Some might not know any better – it’s what they’ve seen their whole lives!

  14. We have a lot of debt due to impulse buying and poor planning. We made some very poor decisions and now we are dealing with the debt and the stress that comes with it.

    • Maybe you’d like to write a guest post for my site? Sounds like you’ve got a lot of experience that my younger readers should hear!

        • Awesome. Can’t wait to hear from you! 🙂

  15. I have never been an impulse buyer, but now that I’m expecting, I am a terrible grocery shopper! I tell my husband every time I come home that he should not let a pregnant woman go to the grocery store unsupervised. Thankfully, my buys amount to about $50 – 100 extra per month, so we’re not swimming in debt yet. But I do need to watch it more carefully!

    • Ha, what is it? Chocolates and pickles? Lol.

    • Good job limiting your splurges. I tell my wife that I can’t go grocery shopping because I would buy too many extra things. Food is becoming my weakness. 🙂

  16. The “investment” is the one that gets me. I don’t care about the other ones, but I still believe it’s ok to get in debt for investment purposes.
    If we can’t borrow to invest in a business, then only rich people will get richer.

    • It’s possible that those that borrow could get richer than those that don’t. But, I’d be content with $10 million – I don’t think I really need $100 mil. The non-debt way is safer too!

  17. You’ve definitely touched on the main reasons people fall into a cycle of debt. I’d add medical as well, though I suppose that could fall under “emergency.” But I think I’d make the distinction that people don’t plan on expensive medical bills so that would be another cause. Oh, and business start-ups or failed business ventures. I’ll add that one to the list. 😉

    • Those big expenses are definitely a contributing factor to massive debt, but I’d say that they are a small percentage. Most of the debt dwellers are in their position because of their own bad decisions.

      • It’s hard to speculate why or how people go into debt, but bad decisions are often the root of it. Whether it was a bad decision to buy a $1500 TV when you didn’t need it or have the money, or bad decisions about the way one spends money on small things on a regular basis. In those cases, not one purchase stands out. It can happen slowly over time and all of a sudden you’re in debt and spending more than you make on a regular basis. An example of bad decisions that could add up over time would be the belief that you can go out for a few beers and wings on a regular basis, or you think you can afford to go out for brunch or dinner on a regular basis, when you really can’t. These expenses would be under $100, so not that noticeable. If you keep an eye on your spending you’ll see these spending habits, but if you don’t you can be in debt before you know it. Bad decisions and bad habits. The bad habits are hard to break.

        • They sure are hard to break, especially if your friends can afford to go out all the time. Keep an eye on that budget and make sure that you know how much you can or cannot spend on a monthly basis.

  18. I went into debt for the typical reasons, I’d like to think. $31K for student loans, $13.5K for a card, $8K in credit card debt (to sustain me in college while I was not working), and then a bit of splurging as I spent $4K on lasik. Additionally, I owed my father $3K.

    It’s been almost 3 years since I began repaying my debt and I’m down around $21K total. It’s been a lot of hard work, and a long road. I’m just looking forward to the first day I can wake up debt free.

    • Becoming debt free is a riot! Let me tell you, you’re going to love it. Keep working toward that goal and you’ll never regret it!

  19. Great post Derek!

    I think we live in a world of instant gratification. People are looking for instant gratification, and would rather spend money NOW to get what they want NOW, as opposed to show restraint and invest for the future. The need for NOW causes people to go into debt.

    • Even with this economic downturn, I still don’t feel like people have enough urgency to get out of debt. It’s engrained in us and I fear it will never change.

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