10 Reasons Why People Stay In Debt (2024)

If you’re taking the time to read this, you probably already know personal debt is a serious problem in the United States. The statistics bear this fact out. According to the Federal Reserve Bank of New York, U.S. credit card debt reached $925 billion in the third quarter of 2022 and could possibly reach $1 trillion this year. The average American household now carries a whopping balance of $17,006 on credit cards from month to month.

Americans spend years dealing with these debts: the credit card fees and interest expenses that accrue, the minimum monthly payments that put little to no dent in card balances, the time spent each month managing the bills, and the missed opportunities due to your financial hardship.

For most people, debt isn’t a short-term problem; it often takes years to pay off and get onto more sound financial footing. So why are so many people struggling with credit card bills and loan payments these days? Check out 10 of the top reasons people remain in debt.

1. Failing to plan

There’s an old saying: people don’t plan to fail, they fail to plan. When it comes to debt, that couldn’t be truer. According to a study, only 32% of Americans have a household budget. Without one, it’s difficult to regulate spending and savings each month. Relying on little more than intuition often leads to failed financial decisions on responsibilities like retirement savings and the purchase of big-ticket items.

Without a budget, it’s extremely difficult to forecast how much money a household will need to sustain itself for the month, or how to best allocate an unexpected inflow of cash. As a result, people often rely on credit cards to carry them through the rough patches every month. But pulling out the card when they don’t have cash on hand adds debt to debt. Additionally, lacking a larger plan for how to allocate their money is a surefire way to suddenly find themselves overwhelmed with debt.

2. Out-of-control spending

It’s easier than ever to spend money on consumer goods these days, and many people do so with abandon. Credit cards make it tempting to forego impulse control and purchase large and small consumer goods – from cars and boats to the most powerful laptop and latest tablet – when it would have made more sense to comparison shop or save up the cash for a purchase. In fact, having a credit card on hand will often lead consumers to make a purchase that they would have passed on if they were paying in cash.

Credit cards have become a financial crutch for American consumers. Purchases using cash already earned are often a secondary option for people armed with plastic. With everyone so willing to finance their everyday lives these days, it’s not surprising that people remain in debt.

3. Limited cash flow

Many people take on too much debt only to find they don’t earn enough money to put a dent in their credit card balances. Once borrowers have accumulated a significant amount of debt, the interest expenses and other fees they pay each month often offset any progress they make in attempts to pay it down. Most borrowers have other significant monthly expenses for things such as rent, utilities, insurance, and childcare, and they don’t have significant leeway to commit more toward paying down debt.

Some borrowers manage to find remedies to mitigate the effects a limited income has on paying off heavy debt. They cut their discretionary monthly expenses back and commit the savings towards debt payments. Some get a side hustle – a part-time job, freelance or contract work – and use their spare time to earn extra income. However, many people don’t have the time to work more or can’t cut additional expenses due to their limited income.

4. Unemployment (or underemployment)

If you accumulated significant amounts of debt and then suddenly find yourself unemployed, it will be nearly impossible to make payments on your debts. You’ll often rack up additional interest expenses and penalty fees while trying to remedy your work situation. If you’re fortunate enough to find another job, you’ll likely discover that your credit card balances have ballooned significantly.

Underemployment can also lead to overwhelming debt. If you find yourself with a substantial cut in hours and a smaller paycheck, it may be hard to make more than the minimum payment on your credit cards. You may also rely upon your credit cards to buffer you through the rough patch until your past income level is restored. Doing this will likely lead to high balances that take a long time to pay off.

5. A devil-may-care attitude

You can also blame complacency for debt. After all, who wants to go to an ATM to take out cash when you can Tap and Go? Too many people aren’t paying close attention to the balances they’re racking up until their bill comes due and they have no way to pay.

It’s easy to become complacent when using credit cards since it has become a part of life. Before you know it, those credit card lunches and last month’s vacation can balloon into thousands of dollars in debt. If you’re unmotivated about paying down your credit card balances – and about 43% of people only make the minimum payments each month – you can find yourself deeply in debt.

6. Living beyond your means

Many people use debt to maintain a lifestyle that is beyond their means. They use their credit cards to purchase items they otherwise wouldn’t be able to afford. In fact, accumulating large amounts of credit card debt is commonly viewed as an indicator that a person is overspending. If you find yourself needing to rely upon a credit card to pay your everyday expenses, such as utilities or groceries, you are likely in financial straits.

High earners often have easy access to correspondingly high amounts of debt. They can qualify for credit cards with high limits, and they often have assets that enable them to apply for secured loans that require collateral. If they’re too liberal with using that access to finance a lavish lifestyle, they can rack up dangerous levels of debt.

7. Failure to adapt

Some people recognize they’re accumulating too much debt but nonetheless find themselves unable to change their habits. Unless they’ve received a sudden windfall, borrowers who desire to get out of debt often must make significant lifestyle changes. They may have to cut back significantly on spending, get another job, consolidate their debts, or work with a debt settlement company. For many people, any one of these things is a bridge too far, and they’re unwilling or unable to make the necessary changes.

Change is hard, especially when it comes to money. If you’ve lived a certain way for a long time, it may be difficult to make the required sacrifices to pay down those credit card balances. Additionally, if your family or friends and others close to you maintain a certain lifestyle, it can be difficult to break up with them in order to pay off your debt. Sometimes, it’s simply a matter of fear.

8. ‘I don’t know how’

Many people simply don’t know where to begin to pay off their debt. Despite surviving the Great Recession and the turmoil it brought, many Americans remain woefully ignorant about money matters. A study found that about two-thirds of Americans couldn’t pass a basic financial literacy test; they didn’t understand how basic financial concepts affected them. Therefore, it’s not surprising that so many are struggling with outstanding debt.

If you don’t understand how interest rates work – and how higher interest rates on some cards can lead to the rapid accumulation of high debt balances – it can be difficult to pay down your debts. There are debt counseling services available for borrowers who lack financial wherewithal and are struggling with high levels of debt. Many are nonprofits and offer their services at no cost.

9. Lack of follow-through

Sometimes, people realize they have a serious debt problem, get help, and have good intentions to resolve it. They may work with a credit counselor, or take more concrete measures, such as obtaining a debt consolidation loan to combine all their debts. However, when it comes time to implement the plan, they fail to follow through.

Some borrowers may be unable or unwilling to make payments as required on a debt consolidation loan or debt settlement plan. Others often lack self-discipline when it comes to debt, so they take out new loans and credit cards even as they’re working to pay off the old balances. In any case, lack of follow-through is a serious issue, and one of the reasons so many people end up staying in debt.

10. Marriage problems

Sometimes, you’re not the problem at all; instead, it’s your spouse. If you and your partner can’t agree on finances, it can lead to problems down the road, including a high amount of outstanding debt in both your names. Managing finances together can be a major source of stress for married couples. In fact, financial problems are one of the top reasons marriages end in divorce.

If spouses cannot see eye to eye when it comes to money, there are options. The first and most important thing they should do is talk about finances as well as how to manage them, especially if they’re accumulating credit card debt. Traditional counseling can help couples communicate about major issues they have with one another, including spending and debt. Finally, working together to choose a financial planner who specializes in working with married couples can also be a way to address problems with debt. Remember: choosing to do nothing will only make your financial issue worse.

You don’t have to stay in debt forever

Debt is a serious problem that many are currently struggling with. Heavy debt can limit your ability to enjoy life and take advantage of fleeting opportunities to enhance your lifestyle. It is also a major source of stress. Yet, despite all the problems that debt causes, there are still many reasons why people never become debt free. It doesn’t have to be that way.

If you have a serious problem with debt, a debt settlement program such as those offered at National Debt Relief can help you pay off your debt for less than you owe. Whatever state your finances are in, the first steps are acknowledging your issues and pulling the trigger to pay them off.