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6 Reasons Why You Are In Debt

6 Reasons Why You Are In Debt

by programmerMay 4, 2016

More often than not, we see red when we look at our bank account balance. If you are not managing your money well, you may be scratching your head as to how you ended up in this predicament.

It’s very disheartening to see red marks on our bank account balance, and it’s even worse if you’re scratching your head, wondering how and when it got to be there! Often it’s due to poor financial management, which luckily can be learned and habitualised. Firstly, though, you’ll need to pinpoint the reasons behind your current in-debt status. Here are six reasons why you’re in debt.

You Spend More Than You Earn

It is often as simple as that. One of the biggest reasons why people remain in debt is because they end up living to work, instead of working to live. Calculate your monthly salary on a daily rate after tax, then how much you spend on any given day. It can be scary and you may find that you spend a large chunk of money on coffee, eating out and spontaneous purchases.


medical insurance
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How to avoid: Stop impulse buying. Avoid the mall and online shopping websites. These are not sources of entertainment, but sources of personal debt. You need to sit down and have a realistic daily budget based on your salary.

You Swipe Your Credit Card for Just About Everything

The convenience of a credit card is undeniable. It lets you spend more than you have which could seriously put you in debt. Besides, it also disconnects you from the reality of your financial situation. And before you know it, your cards are controlling your life and not the other way around.

How to avoid: Unless absolutely necessary, avoid using credit cards and pay using cash for a while. Parting with a hard-earned RM50 note is more difficult than swiping a card. You will have a better sense of what you are spending and makes you think whether the purchase is value for money.

You Are Not Properly Insured

An unforeseen medical issue could land you in debt. It could happen due to sickness or unexpected accidents. This is why you should treat health insurance with the same level of importance as other necessities.

Even if you think nothing bad will happen, you might not be prepared to face the costs when it does. Medical cost is on the rise every year (8.8% for 2015) and one uncovered medical expense is enough to set you back financially.


you overspend
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How to avoid: Try to find room in your budget to finance an adequate health insurance, or at least get your employer to sponsor one to protect you and your family.

You Have Too Many Loans

Student and car loans are two of the most common personal loans a graduate has. Even with a job, fresh graduates struggle to pay back these loans. For some people, taking out a student loan is necessary in order to complete or further their education. But getting a new car is completely optional which is a liability and the loan interest is another additional expense to your existing financial commitments.

How to avoid: Student loan is a good debt if it helps you to improve your financial future by landing you a more promising job. A car loan is definitely a bad debt because cars decrease in value very quickly and it is not a place to invest to build wealth.

Try to pay off any loan as quickly as possible, and if you have a choice between buying a brand new car or retiring that student loan debt, you know what a smart person will choose to do.

You Have Money- and Life-Sucking Habits

Smoking, drinking and gambling are perfect examples of bad habits which you could quit and save money while protecting your well being. Some people dream to achieve financial freedom by taking the shortcut to hit it big by gambling recklessly and making risky investments. In reality, they often lose more than they win and risk incurring more debt in the hope of winning it back.


smoking bad habit
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How to avoid: Quit unhealthy habits if you have some and you’ll be surprised how much money you can save monthly. Forget about easy money and gaining something with nothing – they simply don’t work.

The more effort you put into learning how to invest and make money, the better your chances of being rewarded for your effort.

You Had A Lavish Marriage

Many couples dream of having the perfect wedding: perfect wedding album, perfect wedding dress, perfect wedding dinner and a perfect honeymoon. It is possibly one of the biggest financial outlays a couple will ever make. According to wedding planners, an average wedding costs between RM50,000 to RM80,000. That’s a huge sum of money which could drive young couples to the edge of bankcruptcy.

How to avoid: Plan ahead to avoid the peak season, cut the guest list, consider cheaper options for food have a realisitic budget for your big day. Always stick to what you can afford instead of trying to please everyone else.


Debt is pretty much unavoidable as a means to achieve certain expensive milestones in life, but they don’t necessarily have to bog you down. With sound planning and money management skills, you can take and pay off debt without any problems.

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