Why People Get Into Debt-Trap?

Debt is like any other trap, easy enough to get into, but hard enough to get out ofHenry Wheeler Shaw

Today, we can see many people getting into debt trap for many reasons. Some of them get into debt just because of careless spending, while others because of lack of personal financial planning. Whatever is the reason, people should understand that taking debt is being irresponsible towards their financial future.

Debt is like a disease that if initially overlooked can spread quickly causing damage to every aspect of your life. Debts are a leading cause of major societal problems such as stress, poor family relationships, etc. Here in this article, we will know about the most common reasons why people find themselves stuck in debt-trap.

Not told debt is bad
Many people do not understand the fact that debt is bad. Instead of looking for ways to cut costs/make temporary sacrifices, people treat debt as a tool to purchase non-essentials. But it is important to understand that taking debt to fulfill your wishes is not a smart choice. Living within your means is a right choice and something you should be proud of.

Living within your income shows your competence and responsibility of managing your personal finance. Living on future income is not a sensible approach. Later you will certainly get sucked into a whirlpool of debt as you take more debts to clear current debts and this process goes on.

Desensitized to debt
People’s behaviour has changed a lot in the past years. Lot of individuals are getting into debt thinking that it is a socially acceptable way of life. Sometimes it might happen as near/dear suggest or encourage taking debt. They become emotionally unresponsive by repeated debts and get habituated to take more debts. Thus, people get desensitized to debt as the social circle around them like their parents, relatives/friends, office workers etc., everyone has a debt and considers living in debt as acceptable.

Aspirations vs. income mismatch
Untamed aspirations are another reason for getting into debt. Many people aspire everything from their available income, even though they cannot afford it. It is this culture that encourages debt at all levels. In fact, the current context says that there are majority of people under low income levels where they have barely enough money to pay living expenses. In such a situation, not living within means is to invite financial problems for yourself.

Unfortunately, temporary phase of overspending life will catch-up and brings negative outcomes. Thus, if a hobby becomes compulsion, you might end up spending more than you can afford just for satisfying your inner feelings.

Lack of proper planning

It is not just your bad habits and lack of discipline that forces you into debt; you can also get into debt due to sudden and unexpected expenses, inadequate insurance (medical problems, accidents lead to debt), lack of orientation towards savings, etc. These causes can be prevented by right anticipation and planning. Thus, lack of proper personal financial planning in case of irregular or infrequent events that need money and for which you have not provided the needed protection, can lead you in to a debt trap.

Unreasonable ownership of family members’ financial situation
Most people have an immediate relative who is irresponsible. Do not take unreasonable ownership of family members’ financial situations. You need to know what you are capable of with your modest income. Taking responsibility for financial problems of near/dear will push you into debt that is difficult to repay. So, don’t try to do what you are not capable of. Whatever you earn, you must set expectation to others to the limits you can bear for others’ financial problems.

A person who is in this circumstance is in a very difficult situation. But not being emotionally strong and firm on your financial principles could ruin your life.

Summary:
People get into debt trap because:

  1. They think living in debt is OK
  2. Not willing to sacrifice on lifestyle
  3. Unreasonable aspirations
  4. Not living within means
  5. Not saving for non-standard events that need money
  6. Unreasonable ownership of family members’ financial situation
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