Top 5 Causes of Excessive Personal Debt

Top Causes of Excessive Personal Debt

Excessive debt is the biggest worry of most people. Financial issues are one of the leading contributors to divorce and suicide. We are provided with many opportunities to increase our debt, but getting out of debt can be especially challenging. Think about all the credit card offers and financing opportunities you’re faced with every day.

However, if credit card debt or student loans are not managed carefully, or if you borrow too much and cannot pay it off, this might be considered ‘bad debt’ – which may have a negative impact on your day-to-day finances and your credit score.

There are many things that create excessive amounts of debt, but the following 5 are among the primary culprits:

  1.     Unemployment. The loss of a job forces many people to rely on consumer debt for survival. Most families lack an emergency fund, and the credit cards are put into action rapidly.
  •         Many people fall into the habit of doing just enough work to avoid being fired. Put in the time and effort to become an indispensable member of your company.


  •         If you believe that your job is in jeopardy, start looking for a new position! Be proactive.


  •         Start your emergency fund today. If you already have an emergency fund, ask yourself if it’s adequate.
  1.     Lack of self-control. Our society tends to be a little self-indulgent and lacking in discipline. It’s largely responsible for the high obesity rates in Australia, as well as the high levels of personal debt. How many items have you purchased in a moment of weakness that you don’t ever use or take the time to enjoy?


Before making a significant purchase, ask yourself if it’s something you need or truly want. If it’s merely something you want, ask yourself if it’s something you would really enjoy owning. Will you use it?


        Put off significant purchases for a couple of weeks and see if the level of enthusiasm for purchasing it remains.

Remind yourself that $100 invested at 10% is almost $750 in 20 years. That $500 watch or purse is really costing you $3,750 when viewed this way. Over 40 years the cost is almost $5,500 per $100. That $500 item is then $27,300!


  1.     Not having a budget or financial goals. Good things rarely happen without a plan. It’s important to have a spending plan and financial goals.
  •         Create a budget that supports your financial goals. Develop habits that support your budget.


  •         Regularly review your progress toward your goals and your adherence to your spending plan. When it comes time to make major financial decisions, like purchasing an expensive item, ask yourself if this purchase supports your financial goals.

Top 5 Causes of Excessive Personal Debt

  1.     Excessive or unwise use of credit. We all have our ways of self-soothing. Some people overeat or drink. Others find healthier ways to cope, like exercising. One of the most damaging ways to make yourself feel better is by shopping. It becomes very easy to use a credit card to temporarily improve your mood by buying something that has caught your eye.
  •         But the long-term pain of excessive debt ultimately replaces that temporary boost.
  1.     Divorce. Not only can you lose half of your possessions and your net worth, you might be paying your ex-spouse for years to come. You’re also likely to be stuck with a big attorney bill.
  •         Be careful before jumping into a marriage.
  •         Once conflict begins, seek out professional counselling.
  •         Consider if your situation warrants a pre-nuptial agreement.

Getting out of debt is much more challenging than avoiding it in the first place. Getting out of debt requires time, a plan, and the necessary discipline to stick to the plan. But if you can avoid these five primary debt mistakes, avoiding debt will be much easier. If you’re already in debt, getting out will be that much easier.

Remember that even if you have experienced debt problems in the past, these bad debts won’t stay on your credit file forever.