Share 97 Shares

Everybody knows that too much debt is bad; the financial universe is filled with blogs, experts, and gurus who tell us as much and even how to get out. So why is it that people cannot get out of debt? Is it because debtors behave badly, that they fail to adequately confront their credit problems?or are they just plain lazy?

Maybe, possibly in some cases, but I think there?s a lot more to it, and by the time you?re finished reading this list, you may have a better understanding as to why?if you?re deep in debt?you?re having such a tough time getting out of it. Knowing what you?re up against is the first step to solving a problem, and only when you do can you make any real progress.

1. Lack of sufficient income to do so

A lot of people are making less money than they were just a few years ago. They were making more money when they incurred their debt, but now the lower income level has them in a trap where they have barely enough money to pay living expenses, let alone pay off debt.

2. A rate of inflation that’s substantially higher than what is publicly reported

Over time, expenses are growing faster than income, especially since raises are usually tied to the understated inflation rate (CPI). Does anyone really believe inflation is running at the 1-2% rate that?s claimed by the CPI? A 2% raise (again based on the CPI) will cause a drop in real wages in an economy where prices are rising by something closer to 5-7%. This is a very carefully hidden obstacle that requires either steadily lowering living expenses or being on a perpetual quest to find additional income sources. Many households are using credit to cover the difference, which is a strategy that?s destined to have an unhappy ending.

3. Conforming to a ?standardized? idea of middle class life

When I was younger, if a family couldn?t afford a new car they bought a used one, and if they couldn?t afford that they bought a beater. If they couldn?t afford to keep their house, they sold it and moved to a rental or in with family. But in the past 20-30 years there’s been a kind of standardization of middle class life?how one must live and what one must own to live in it. Call it the “TV version” of middle class life. Many people can no longer afford to live this lifestyle, but they?re emotionally rooted in it and cannot abandon it. Once again, credit is often used to bridge the gap.

4. A benign view of debt

Culturally, debt is seen merely as a way to get from where you are to where you want to be. Want a house?take a mortgage. Need an education? Student loans can help. Can?t afford a car? Bring us your trade in and we?ll finance the rest. All of these require little or no money up front and make the process easy. Credit cards are just an extension of other forms of debt and a natural outgrowth. If debt is what ?moves us forward? then how can it be a bad thing? Once you start thinking that way, you?re licked.

5. A culture that encourages debt at all levels

Credit is what moves the economy isn?t it? At least that?s what we?re told by those who are supposed to know. I?ve never agreed with this thinking. Money is what moves the economy–how it comes into being is the real issue. We can either earn it or save it?historically the preferred methods?or we can borrow it. The System?for lack of a better term?encourages us to borrow it since that?s the quickest way to make it happen. Once we have money?what ever the source?we can buy, buy, buy, and that?s what moves the economy. But when we use debt we?re also creating liabilities and they don?t go away once a paycheck shrinks or disappears.

6. A lack of orientation toward savings

Americans have a terrible track record when it comes to building savings, and we?re paying a huge price for it. Savings are the most fundamental antidote to debt?when we have plenty of savings we?re ?self-financing? and don?t need debt. Building up savings is the first step to getting debt out of your life, and that requires a fundamental shift in financial thinking.

7. Too much structural debt

Over the past 20-30 years people have taken on too much structural debt. Mortgages and student loans are widely thought to be “good debt” but represent the foundation of even more debt. They?re long term debt, which creates the need for ever more cash later, and if it worked when you bought your house or your education it can work with anything else you buy, right? Mortgages and student loans can work if you don?t overbuy, then commit yourself to paying them off. For many people, however, mortgages and student loans set the stage for a lifetime of indebtedness.

8. An economic system that has a vested interest in keeping consumers in debt

Merchants have a symbiotic relationship to consumer debt?more credit equals more consumers, equals more sales, equals more profit. They?ll often provide the credit for you, all you need to do is come in and buy. This situation exists at nearly every level of the economy and, along with the media, it works to lower our resistance to consuming?and to going deeper into debt.

9. Habit

OK, this one is comes closest to being a pure personal fault by a debtor. Like smoking, drinking and over eating?people get into debt, learn to live with it and just continue on. If you want to break this cycle, it will require an effort comparable to a crash diet. Even though there?s long term benefit to doing it, the short term is uncomfortable and easy to avoid.

10. Debt has become a massive pyramid scheme

There was a time not long ago when lending was considered to be a fringe function in society; the old saw was ?before you can get a loan you first have to prove that you don?t need it?. No longer. Credit is very easy to get and has been for a few decades. Because of that ease, lending has grown into a trillion dollar industry, with many layers. You can borrow with the swipe of a credit card, and when your revolving debt reaches the point where you can?t manage it, you can consolidate it with a home equity line of credit (HELOC). When the HELOC gets stressful, you can consolidate it with a new first mortgage on your home. See the trend? If it weren?t so legitimized in our culture and economy, we might be able to identify it as the pyramid scheme that it truly is. Nothing in that system is set up to encourage us to get out of debt, but just to roll it over to more tolerable loans.



As you can see, the obstacles to getting out of debt are enormous. It?s not just your bad habits and lack of discipline that are keeping you in debt, you?re getting a lot of help from a culture that?s keeping you in that ditch. This isn?t an attempt to give debtors a pass or to deflect responsibility, but rather to paint a full picture of the true obstacles.

If you have a serious amount of debt to payoff you need to?

Understand the big picture obstacles you face in trying to get out of debt

Make a concentrated effort to resist those obstacles by setting and living by your own standards and preferences

Be fully prepared to lower your standard of living as low and for as long as it will take?separate wants from true needs

Stop using credit going forward

Be ready to increase your income?if you?re paycheck doesn?t increase to cover the true cost of living or paying off debt, then be ready to do what you need to find additional sources

Make savings?and not borrowing?the standard of your financial success

Once you?re out of debt, vow never to get back in.

You may not have the entire blame getting into debt, but rest assured you?re 100% responsible for getting yourself out.

What are your thoughts on why people can?t get out of debt?

( Photo from Flickr by Leo Blanchette )