How To Get Out of Debt – Part 3: Why You’re Still in Debt

Part 3 – Why You’re Still in Debt

Here are the first two parts of the DIY Money Guy Series: How to Get Out of Debt.

Part 1 – Own Up to Your Debt

Part 2 – Tell People


Have you ever wanted to buy something, but didn’t have quite enough money? Of course you have. I have and practically everyone I know has. We all tend to want to buy stuff that we can’t afford. The only difference between those in debt and those who are not in debt has little to do with actual savings and a lot to do with self-control.


What is Debt?

According to the Merriam-Webster dictionary, the definition of “debt” is “an amount of money that you owe to a person, bank, company, etc.” Debt is simply money that has been borrowed and needs to be repaid. Typically the borrowed money is accompanied by a deadline or at least a repayment schedule. There is also usually interest which is additional money that you are charged by taking the loan. But debt is so much more than just owing somebody money. Debt is a ball and chain that prevents you from living your dream lifestyle.

But what else does debt mean? Think for just a minute about debt in terms of time instead of money. Borrowing money is really spending time. I say this because you will most likely need to spend time working in order to earn more money so you can pay off your debt. Therefore, when you take on debt you are really committing your future time to working, rather than being able to spend time with your family and friends having fun. Quit wasting your future time working and figure out why you are still in debt.


Top Causes of Debt

As I have stated before - personal finance is really simple, right? Just spend less then you earn and you’ll never have a problem. We all it know it isn’t always that simple. Most people have some type of debt. Like with any situation or problem, you can usually start to figure out what you need to do after you take a step back and try to better understand what has already been done. Or as the old cliché goes, “You can’t know where you’re going, until you know where you’ve been”. What this message could mean in the personal finance world is that you need to understand where your debt came from and the reasons why you’re still in debt. Additionally, if you are aware of the many common pitfalls with money and debt you will have a better chance at avoiding them in the future.  

There are some pretty typical causes of debt that you would probably expect most people to have experienced at some point in their lives like mortgages, car loans, and student loans. Another common cause of debt is just plain old poor money management, like the crushing combination of excessive credit card use with no savings. This poor money management scenario will almost always lead to pretty significant debt in a very short amount of time. Some other common causes of debt are medical expenses, gambling, keeping up with the Jones’ mentality, and buying recreational equipment like boats, RV’s, and motorcycles. Then there are the unexpected life events that can force people into debt as well. Emergency medical expenses, divorce, or lost income because you or your spouse was laid off from their job.

I’m sure several of these really hit home for you. I myself have experienced several of these top causes of debt. While some of these causes are potentially recurring issues like gambling, most of these causes for debt are really single occurrences or at least very infrequent occurrences. Hopefully you are not experiencing many of these, but if you are they shouldn’t be very often at least.

But none of these major causes of debt necessarily mean you will go into debt. In my last article, Money for Life….and Death, I discussed the importance of saving and how it can give you some freedom and options in life. Well, if you fail to save a little bit of money before something happens then just a couple of these causes for debt can wreak financial havoc on you for the rest of your life.

These are all just some of the causes for people initially going into debt, but it doesn’t explain why you are STILL in debt.


Top 5 Reasons Why You Are Still in Debt

In reality the only reason why you are still in debt is that you borrowed too much money and you aren’t paying back enough each month. That’s it.

Let’s drill down into some of the other contributing factors to why your debt is still looming over you.


1. You Still Use Your Credit Card

Stop it! Just stop it! Quit using your credit cards and adding to your debt when your real goal is to pay it off. Go take your credit card out of your wallet or purse so you aren’t even tempted to use it. If you have more than one credit card I would even go as far as to recommend cutting up all of them except for one. And the one you have left is for emergencies only. And I mean real emergencies like a car breaking down or home air conditioner not working. Leave this last credit card that is for emergencies only tucked away in a drawer at home.

Until you are out of debt, you can’t afford anything if you cannot pay cash for it. Cash is even better than using a debit card because studies have shown that we spend more when swiping the plastic then if we pay in cash.




2. You Don’t Understand the Scope of Your Debt

A study published last fall shows that people have a pretty good idea about how much they owe on their homes and their cars, but are terrible at estimating credit card and student loan debt. The study found that people estimate their credit card debt to be 40% less than what the lenders report, and families underestimate their student loan debt by 25%. can fix this problem of guessing and underestimating how much you owe. can track all of your accounts from personal loans to credit cards and retirement accounts.  I mentioned before in another article, Top 10 Most Common Money Mistakes and How To Fix Them. Mint is a great free resource for keeping track of all of your accounts so you know exactly where you stand on all of your accounts at one quick glance.


3. Paying Only the Minimum Balance

Banks and credit card companies love it when you only pay the minimum balance. The longer it takes you to pay down your debt, the more money they make by charging you interest. You should put away any all extra cash towards whatever debt you are trying to pay off at the time. Even if you can only pay and extra $20 above the minimum balance due, every little bit helps.

For example, say you are carrying a credit card balance of $5,000 with a 12% APR interest rate. If you only pay the minimum monthly payment of $100, it will take you 70 months (5.8 years) to pay off the card. And by the time you have the card finally paid off at the end of the 70 months you will have paid a total of $6,966 – that’s $1,966 in interest!

But, if you bump your monthly payment up by twenty bucks to $120 per month, you can pay off the card in 55 months (4.5 years) and pay $1,500 in interest. Just about anyone can make an extra $20 per month. That little bit of extra money will get you out of debt 1.3 years sooner and save you $466 in interest! I bet you didn’t expect twenty bucks to have such a big impact!

Here is a link to a Credit Card Payoff Calculator so you can run your own numbers.





4. Keeping Up With the Joneses

Many people would rather struggle to pay their huge credit card bills than admit to their friends and family that they can’t really afford dinner, basketball tickets, private school for the kids, etc. They will just keep using credit cards and borrowing money to make sure they appear to be doing well. Keeping up with the Joneses is stupid. In reality the “Joneses” are most likely either really wealthy or have a ton of debt. Either way, peer pressure is a top reason why you are still in debt. Don’t let other people force you to spend the money that you don’t want to spend. Your spare money needs to go towards debt so you can start working toward your goals and dreams – a family vacation, a Masters’ degree, or even early retirement.




5. You Don’t Have a Plan

The majority of Americans have no clue why they run out of money every month. That’s because most people don’t have a budget or track their spending. How can you expect to make smart decisions with your money if you are just guessing how much you are spending?

The most successful people at paying off their debt make a plan to do so in three years or less. Studies have shown that as the timeframe for a goal extends past three years that people tend to get really burnt out, lose focus and end up not reaching their objective.  

Another practice of people who successfully pay down their debt is that they put every spare dollar towards their debt. I’m talking any birthday money, any random refunds from returning stuff, any money you happen to find in old clothes, drawers, and furniture. Every extra dollar you come across should go toward your debt. Also, every dollar left over at the end of every month turns into an extra payment towards your debt. The only way to find these extra dollars every month is to create a budget. If you have never created a budget, don’t stress. It is way easier than you think. Learn how to create a realistic budget with Mint.

There are numerous factors that contribute to why you are still in debt. Now let’s shift the focus of why you’re still in debt to be more forward thinking and goal-oriented.


Understand Your “Why”

Understanding your “why” isn’t really about why you are still in debt. Sure, acknowledging the reasons and behaviors that keep you in debt is important. But the key is finding your motivation to get out of debt. Of course you hate having a credit card bill every month. It can be very discouraging when the balance of your debt never seems to go down. But what’s the real motivation? The people who succeed at reaching their financial goals are the ones who think about and decide on the “why” behind each goal. Once you have the “why” for doing something then decision making can me much easier as well as what you need to do next to meet you goal of getting to your “why”.  

The more you are more motivated to do something, the quicker you tend to make progress. The quicker you make progress, the happier you are with the outcome. And why would you be happier? You’re happiness with the outcome is directly related to what you personally value – the stuff that you believe in. So there you have it. Figure out what your reason is for wanting to get out of debt and you will be happier and accomplish your goal sooner.  

Let use planning a vacation as an example. You are really looking to the trip to relax, unwind, soak up some sun, cool off in the water, and enjoy some nice cold adult beverages (insert your favorite here). You are really looking forward to this trip but planning will actually take quite a bit of work. First, figure out where you want to go. Then try to find the cheapest flights with decent flight times and the fewest connections/layovers possible. Next you have to decide where you are going to stay – all-inclusive resort, hotel, AirBnB, and so on. How are you going to get around for transportation - rental car, taxi, walk, does Uber even operate when you are going? Then figuring out what activities you want to see and experience.

All of this research and comparing and price checking will take hours. But most of us don’t mind doing all of this stuff because we are so anxious to go on vacation that we can already picture ourselves lying on a beach towel at the beach with a cold drink in hand. Because we get so anxious about the trip we are motivated to get everything booked for the vacation as soon as possible. Then you get to reap the rewards of all of your hard work and enjoy the trip of a lifetime with family and friends.

Start making progress on your debt as soon as possible. Find your motivation and you will be happier as well as one-step closer to achieving your goal. Think about how you will feel making the last payment towards your debt. What will you be able to do when you don’t have all of those monthly debt payments? What will be the best part about being debt-free?

So what’s your “why”? Why do you want to be debt-free?


Start working on your debt today so you can learn more, save more, earn more.


For more information on the topic here are a couple great books on personal finance and debt management:


What do you think?