Sunday 24th of January 2021

Never Can Get out of Debt?

You know you’re in debt, and you probably also know why and how you ended up that way. You might even be well aware of how to get out of debt—budgeting, saving, cutting back spending, etc., but you’re still not making any progress. If that sounds like you, you’re not the only one. Recent research indicates that people who are broke will probably remain that way for a good while. You could say, then, that debt isn’t just a mere problem anymore; it’s an epidemic. Debit and credit have changed the way we live, spend, and think. So is debt your destiny? We’ll address this question and tell you how you can overcome the odds to reach financial freedom.

Borrowing Is All Too Easy

In the seventies, Congress began loosening the regulations governing the credit card and banking industries. As a result, borrowing became as easy as making a bag of microwave popcorn. As of last June, Americans had outstanding consumer debt of $2.25 trillion. The average household credit card debt has almost doubled since 1989. The overarching message? Borrowing has become much too easy, and now consumers are plagued by the habit.

Credit Changes Your Neurons

Credit quite literally has changed the way we think about money. You might look at consumer spending statistics and conclude that Americans love to spend. Actually, most people hate spending their hard-earned cash, but we’ve gone to a cashless society that makes spending infinitely less painful. Researchers point to a phenomenon called “coupling” to explain the culprit behind our new spending attitudes. Studies show that when a purchase and the payment for it are linked closely, like when you pay with cash, consumers are more aware of what they’re spending and they tend to spend less. The purchase and the payment are “coupled,” in other words. However, when the purchase is made and the payment is significantly delayed, as with credit card purchases, the purchase and payment are decoupled, which facilitates less awareness and more spending.

What to Do

Here’s how to get out of debt and get real about your finances:

  • Track your expenses on a daily basis. It’s easier to stay in the habit when you do it every day.
  • Use cash over plastic. People who use cash spend less money, and they are more realistic about what they buy.
  • Don’t play money games. You can’t fudge the numbers in your budget and expect to come out on top. For example, if you get a refund for $2,000 from a vacation you canceled, that is not a surplus; it’s money you should devote to other expenses.

Additional Resources