Definitive Guide to a Debt Free Life – Chapter 2: Common Reasons People Fall into Debt

In Chapter 1, you learned exactly what debt is and what specific type of debt you are struggling with. You are already way ahead of where you were when you started this guidebook on your path to a debt free life.

But now that you know what debt is, it is important you understand the most common reasons people fall into debt in the first place.

According to Brigham Young University’s Marriot School of Management, it is essential to understand the debt cycle and the reasons people go into debt to truly understand the nature of the beast. (

resist debt

No matter what type of debt you are in, understanding why it occurs is the key to preventing it from occurring again.

The Debt Cycle

The main reason that some people flounder in debt throughout most of their lives while other people keep up with their payments is simple. It all comes down to the debt cycle.

The debt cycle starts when a person spends more money than they make. Much of the time, they know that it is wrong to do but they continue to do it anyway. Some people convince themselves that it is be a one-time thing.

But, for most people, it is not. Overspending once leads to another instance of overspending which then spirals out of control. Suddenly you find that you must borrow money to maintain your existing standard of living.

Much of the time this involves using your credit card for new purchases. It can quickly turn into maxing out your existing credit card and then you getting another.

The debt cycle continues in much the same manner. You continue to borrow and spend money you do not have. Each month your debt piles up higher and higher and it is much more difficult to climb out of.

And then there is interest. The more maxed-out credit cards you have, the more interest you will have to pay on new ones. At the same time, most people in the debt cycle only make minimum payments on their current credit card bills. (

The debt just keeps piling up.

You are basically trapped. Unless you change your behavior, you will be in debt for your entire life. Luckily, changing your behavior is possible for everyone (as you will see later in Chapter 6: Debt Management).

Most Common Reasons People Fall into Debt

For many, the debt cycle is never-ending. But, for all, it does not need to be.

Simply understanding the common reasons people fall into debt can help you set your priorities straight and get back on track financially.

Below are five of the most common reasons people fall into debt:

  • Ignorance – No one likes to hear it, but many people are in debt because they do not understand how a loan or a credit card works. They do not understand interest and how much it adds up to. Many people are ignorant just because they do not know any better. However, other people are purposefully ignorant. They know that learning how debt works will force them to change their spending habits and they do not really want to do this.
  • Carelessness – Other people understand debt but they just get a little lazy and careless. As mentioned above, many people get into the “one time won’t hurt” mindset when it comes to overspending. But it does hurt. Even when you only do it a single time.
  • Pride – Another common reason that people fall into debt is pride. Too many people worry too much about what their neighbors, friends, and family think of them. Because of this they borrow money for things they think will help them fit in or look good in the eyes of others.
  • Compulsiveness – Self-control is a hard skill to learn and a lot of people have absolutely none when it comes to spending money. I mean, look at it this way: spending money is a lot more fun than saving. But, in the long run, a good balance needs to be struck.
  • Necessity – Simply put, a lot of people fall into debt because they have no other choice. Everyone needs money for food, shelter, and other basic needs but unfortunately we do not all have that money. It is cases like these where people are forced to overspend simply to survive.


Other Reasons People Fall into Debt

There are a few other ways that people fall into debt. Though these are more specific than the reasons discussed above, each one has one of the above reasons at its heart.

Five other reasons people fall into debt include:

  • Divorce – More than half of all adults in the United States go through at least one divorce in their lifetimes. Unfortunately, divorce is incredibly expensive and can leave both parties in deep, deep debt nearly instantaneously.
  • Poor Money Management – Not knowing how to manage your money is a surefire way to land yourself in debt. And a stupid way. Money management is easy with a solid budget plan.
  • Unemployment/Underemployment – It is hard to stay on top of your finances when you are unemployed or even underemployed. If you are not making enough money to cover all of your expenses, then you are in trouble. Ask for more hours, get a second job, or get a better job. Do whatever it takes.
  • Gambling – Gambling is a serious problem for many and can quickly throw even the wealthiest among us into deep debt. It is a problem, it is an addiction. But there is gambling addiction help available.
  • Medical Expenses – Expenses related to medical help are a huge reason people are in debt. Even if you are not in a medical emergency, a simple visit to the doctor can be a huge expense.


This chapter was not meant to scare you. Even though it is serious and you are likely in debt because of one of the reasons discussed above, the information will prove useful in the long run.

Even just knowing why you are in debt is a huge step to overcoming it!

The common reasons people fall into debt discussed above will come back around later in this guidebook as we discuss different debt relief options and ways to manage your money and finances. For now, however, it is just a primer on the debt cycle and why debt is such a prevalent problem in the United States today.

But, seriously, do not worry. Getting out of debt is actually easier than it sounds. Especially once you know what you are doing.

And in our next chapter, we discuss exactly what you need to do to manage one critical element of your financial life: your credit card.

Continue on to Chapter 3: How Credit Cards Should Be Used to learn how to manage your credit card spendings and prevent the much-dreaded debt cycle.


  •, “Understand the Debt Cycle and the Reasons People Go into Debt”

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