The personal debt crisis is taking over the world and no, I’m not joking.
Everywhere we look we are conditioned to have the things we want now, we are conditioned to get into debt and have the instant gratification straight away. Golly Gosh how did this happen! Well in this blog I’ll explain how and then show you ways of changing your mindset and then help you turn your debt around!
The How!
Think about it this way – big corporations are out to make money right? Right. Absolutely!
They’ve created enticing deals to get you to buy into debt..
Think about it again.. this isn’t for your benefit, it’s for there benefit. They are making the money off you
“Buy this couch today, no money down, deferred payments and 36 months interest free”
All of a sudden you’ve gone from shopping for a lounge suite to shopping for the best finance deal because no matter if you had the money to pay for the lounge out right, you’re not going to pass a deal where you pay nothing and get to keep your money in your own bank account a little longer. It’s Human Psychology and they know it and plan the marketing!
You think you’ve got nothing to lose. So you get the best finance deal, the lounge suite and you’re on your merry way home with your fabulous new purchase (oh and your money still in the bank) and over the next few months you think you’re doing awesome at paying the repayments when the bill comes in, that when a new deal comes in it’s too hard to resist! The email goes a little like this:
Hi Jane,
We hope you’re loving your new Lounge suite! Because you’re one of our VIP customers, we want to offer you a one weekend only deal.
No Deposit, Deferred payment and 6 months interest free – This Weekend Only!
It’s like they know you could use a new coffee table – How can you resist!? you run down to the shop and pickup your new coffee table. What’s a little more finance?! It’s only $699 I can save that and pay it off before the 6 months is up….
And the cycle continues, congratulations your in debt. You end up paying interest, then compounding interest – yikes!
You then second guess every life decision you’ve ever made and consider debt consolidation, which let me tell you is not going to make your debt go away, its not going to pay your debt off faster it’s just making it easier for you too pay and they (the big corporations) are still making their money.
The Why! Why do you go into debt?
1
Is it to keep up with what your friends and family have?
2
Is it because you don’t want to wait?
3
Do you not actually know why?
Are you self sabotaging and you had no idea?
Debt is a crazy hole to get stuck in and it take a fair bit of work to get out of!
The Why! So let’s face your debt! – Why are you here today? What would it mean to be debt free?
The first step to becoming debt free is to face the issues that led to your debt.
I believe that if you don’t know what your problems are to begin with, then it will be very hard to make any positive changes.
Yes, it is great to just start paying down your debt, but you also don’t want to fall into the same cycle of going into debt over and over again.
It’s this side of the topic that’s avoided or misunderstood. It’s uncomfortable to admit a problem or go deeper into the pychology of why you are in debt. You might be here because you’re overwhelmed, feeling trapped by bills that never seem to go away, you’re stressed, tired and might even be considering a second job or side hustle? The reasons people end up in debt are varied..
unexpected life events, overspending, or simply not understanding how interest and minimum payments work.
But what would it truly mean to be debt-free? It’s not just about numbers on a statement, it’s about regaining control of your life, having the freedom to make choices without that constant financial burden hanging over you. Getting debt-free isn’t just a dream – it’s an achievable goal, and it starts with understanding your debt and taking the first step toward freedom.
Reasons Why..
Living beyond your means: Have you fallen into the trap of spending more than tyou earn, whether it’s on luxury items, unnecessary upgrades, or even just trying to keep up with social expectations. This can lead to accumulating credit card debt or taking out loans that can’t be repaid.
Lack of financial literacy: Without understanding how credit works, the impact of interest rates, or the importance of budgeting, you may unknowingly dig yourself deeper into debt. Many aren’t taught how to manage finances, leading to poor decisions like only making minimum payments or borrowing without fully understanding the consequences.
Impulse Spending: Impulse buying, often driven by emotions or the desire for instant gratification, can cause you to accumulate more debt than you can afford to repay. Sales, promotions, and online shopping can make it easy to overspend without thinking about the future impact on finances.
Ignoring the problem: Do you avoid facing your financial issues, hoping they’ll just resolve on their own? This avoidance can lead to missed payments, late fees, and higher interest rates, making the debt situation worse over time. Denial or shame about being in debt can also prevent you from seeking help.
Using debt to cover necessities: Facing an emergency—such as medical expenses, job loss, or unexpected bills—may resort to credit cards or loans to cover basic needs. Over time, this cycle can snowball, making it difficult to break free from the debt.
Not having an emergency fund: Without a safety net or savings cushion, even minor setbacks can lead you to take on debt. An unexpected expense or loss of income can push you further into the red if you don’t have savings to fall back on.
Social pressure and lifestyle expectations: Going into debt trying to live up to societal standards or keep up with friends, family, or peers. The pressure to have the latest technology, wear designer clothes, or go on expensive vacations can lead to borrowing money in ways that aren’t sustainable.
Debt Consolidation Missteps: While consolidating debt can seem like an easy fix, it’s often not the solution people think it is. If a person consolidates their debt but doesn’t change their spending habits, they can quickly find themselves right back in the same situation, or even worse.
Failure to prioritize debt repayment: Many get overwhelmed by the amount of debt they owe and fail to prioritize paying it off strategically, is this you? Without focusing on high-interest debt first or setting up a proper payment plan, the balance continues to grow, making it even harder to get out.
Emotional and mental health struggles: Stress, anxiety, or depression can affect decision-making and lead to poor financial choices. You may find it difficult to deal with a debt situation due to emotional exhaustion, which can make it hard to take positive action toward financial recovery.
Psychological factors
Instant gratification: Our brains are wired to seek immediate rewards, and the allure of instant gratification can make it difficult to delay purchases, even when we know it may lead to financial problems later. This desire for quick rewards often outweighs the long-term benefits of saving or being mindful of expenses, pushing you toward borrowing or overspending.
Denial and avoidance: You experience a sense of denial when it comes to debt. You may avoid opening bills, checking bank statements, or acknowledging the true extent of their financial situation. This avoidance can be driven by feelings of shame or guilt, making it harder to confront the problem and take steps to resolve it. Over time, the debt continues to grow, making the situation even more difficult to manage.
Cognitive dissonance: This occurs when there is a disconnect between someone’s beliefs and behaviors. For example, a person may believe they should be financially responsible but continue to overspend or make poor financial choices. To reduce the discomfort caused by this contradiction, they may justify their behavior by telling themselves they “deserve” it or “can deal with it later.” This rationalization can delay necessary action and perpetuate the cycle of debt.
Social comparison and peer pressure: You often compare yourself to others, especially in a world where social media and advertising create an idealized image of success. The pressure to keep up with peers, buy the latest trends, or maintain a certain lifestyle can lead you to take on debt to match these external expectations, even when it’s financially unsustainable.
Low self-esteem and emotional spending: For some individuals, debt is linked to emotional needs. Spending money can provide a temporary boost in mood or self-worth, especially when they’re feeling lonely, stressed, or down. This type of “retail therapy” can quickly spiral out of control, as the underlying emotional issues aren’t being addressed, and the cycle of overspending and accumulating debt continues.
Fear of missing out (FOMO): The fear of missing out on experiences or opportunities, whether it’s a vacation, an event, or a new gadget, can drive people to make financial decisions that don’t align with their current capabilities. This impulsive behavior often leads to borrowing money or accumulating credit card debt in an effort to keep up with what others are doing.
Lack of financial identity or control: You may not have developed a strong financial identity or sense of control over your money. This lack of financial awareness or confidence can leave you feeling helpless when it comes to managing their debt. You may feel overwhelmed by the complexities of budgeting or be unsure of how to make effective changes, which perpetuates feelings of anxiety and inaction.
Over-optimism bias: Many have a tendency to be overly optimistic about their future financial situation, believing they’ll be able to “handle it later” or that their income will increase, allowing them to pay off debt in the future. This bias can make them delay necessary actions and continue to take on more debt with the belief that things will improve without any real plan in place.
Learned behavior from childhood: For some people, their attitudes toward money and debt may have been shaped by their upbringing. If they grew up in an environment where financial struggles were common or they witnessed poor money management habits, they might adopt similar patterns in their adult life. These learned behaviors can be deeply ingrained and difficult to break, even when they recognize the negative consequences.
Stress and Anxiety: Constant financial stress can lead to a psychological trap. The overwhelming worry about paying bills, dealing with creditors, or facing the unknown can trigger anxiety, which in turn affects decision-making. Anxiety can lead people to avoid dealing with the problem altogether or make impulsive financial decisions to temporarily relieve their stress, worsening the situation in the long run
Addressing psychological factors is crucial to breaking the cycle of debt. Understanding the emotional and mental reasons behind financial behavior can help you take control of their finances, develop healthier money habits, and work toward becoming debt-free.
Tell me in the comments what you struggle with the most. Would love inspiration for my next blogpost
Hi, this is a comment.
To get started with moderating, editing, and deleting comments, please visit the Comments screen in the dashboard.
Commenter avatars come from Gravatar.