post written by: Marc Chernoff

This Is Why You Are In Debt

This is Why You Are in Debt

The only way to get out of debt is to understand why you’re in debt in the first place.

And the truth is…

You will not save money when you get your next raise.  You will not save money when your car is paid off.  You will not save money when your kids are supporting themselves someday.  And you wouldn’t even save a dime if I handed you $100,000 in cash right now.

How do I know this?

Because saving money has very little to do with the amount of money you have.  In fact, you will only start to save money when saving becomes an emotional habit – when you start treating the money you handle everyday differently.

So this is why you are in debt:

  • You buy miscellaneous crap you don’t need or use. – Stop buying ‘stuff’ on impulse!  Avoid the mall!  The mall is not a source for entertainment.  It’s a source for personal debt.  There’s no reason to tease yourself by staring at a bunch of brand new crap you don’t need.  And as you know, the novelty of a new purchase wears thin long before the credit card bill arrives.
  • You use credit to purchase things you can’t afford to buy in cash. – If you can’t pay for it in cash today, don’t buy it today!  It’s as simple as that.
  • You think of certain product brands as fashionable status symbols. – A car gets you from point ‘A’ to point ‘B.’  A purse holds your personal belongings.  A pair of sunglasses shades your eyes from the sun.  A shirt keeps you warm.  If you’re paying premium prices just to get a fashionable brand name labeled on each these products without any regard for how well the products actually serve their practical purpose, you have a problem.
  • You buy a brand new car every few years. – See my previous point.  A car is a means of transportation to get you from one place to another.  If you’re buying a new car every few years even when your old car works fine, you’re likely trying too hard to impress the wrong people… and you’re going broke in the process.
  • You buy things you could have borrowed from a friend or rented. – After you bought that DVD, how many times did you actually watch it?  Do you really want a 20 inch chainsaw collecting dust in your garage?  So you own a pressure washer you only use once every three years?  You get the point… borrow and rent when it makes sense.
  • You pay retail prices on everything you buy. – If you’re paying retail prices, you’re getting screwed.  You can easily save well over $1000 a year on general purchases by waiting for sales and shopping at discount outlets.
  • You own (or rent) way more house than you need. – When you buy or rent a house that’s bigger than you need, you end up wasting lots of money on larger monthly payments, higher upkeep costs, higher utility bills, and lots of random ‘stuff’ to fill up the extra empty space.
  • You don’t follow any sort of formal budgeting plan. – Do you assume that if you wait around and make more money your finances and credit debt will magically resolve themselves?  I’m sorry to say, you’re dead wrong!  It takes a lot of planning and proactive budgeting to erase a pile of debt and build a nest egg of wealth.  So start now!
  • You don’t automate 401K or savings deposits. – We’re ten years into the new millennium.  If you aren’t using simple technology to automate savings deposits, you pretty much deserve to be broke.
  • You don’t leverage the small investments you do have. – You have to give your money the opportunity to make money.  Any capital you do have, no matter how small, should be invested using a basic, long-term investment strategy.  If your capital isn’t invested, it’s just losing value as inflation rises.
  • You’re married to (or dating) a spend-thrift. – You’ll never get out of debt if you’re married to a person who spends every dime you make.  So help your soul mate become financially responsible, or except life in the poorhouse.
  • You’ve never educated yourself on basic money management. – Responsible money management is not an innate human instinct.  You have to properly educate yourself.  If you don’t, you’ll stay exactly where you are now, in debt.
  • You have a ‘get rich quick’ mentality. – For 99.99% of us, wealth doesn’t come instantly.  You’re far more likely to be struck by lightning twice than win the lottery once.  If you’re spending your time and money on a ‘get rich quick’ scheme, the debt will just keep piling up.
  • You have nasty, money-sucking (and life-sucking) habits. – Smoking, drinking and gambling are all perfect examples of bad habits in which you choose to trade short term pleasure for long term debt and discomfort.  So light one up, shoot one down, and toss another chip across the table.  It’s only your life.
  • You waste too much of your own time. – They say “time is money,” but I think time is way more valuable than money.  It’s the single greatest constituent of life.  If you fail to properly manage your time, you’ll absolutely fail to properly manage your money… and you’ll likely fail in every other aspect of your life as well.  So focus your time and energy on the important stuff and forget the rest.
  • You aren’t taking care of your health. – Keep your body and mind healthy!  Major medical problems drain back accounts, increase insurance rates, keep you from working and earning money, and generally guarantee that you will have long-term financial problems.
  • You aren’t enjoying life’s (free) simple pleasures. – The best things in life are free.  Stop wasting your money on second-rate entertainment and take a good look around you.  Mother Nature offers lots of entertainment free of charge.  Go hiking, go skinny dipping, play in the rain, build a bonfire with your friends, watch the sunset with your lover, etc.
  • You went through an unfortunate divorce. – This final point might seem cruel, but it’s impossible to discuss the major reasons why people accumulate financial debt without mentioning divorce.  Divorce absolutely destroys the finances of both parties involved.  So the best advice I can give you is:  Don’t get married until you’re certain you want to spend the rest of your life with your significant other.  And don’t get a divorce until you’ve truly exhausted all of your other possible options (marriage therapy, etc.).

Please remember, financial debt can be avoided and erased.  It just takes a little effort, education, and determination on your end to make it possible.  So as I’ve said before, live a comfortable life, not a wasteful one.  Do not spend to impress others.  Do not live life trying to fool yourself into thinking wealth is measured in material objects.  Manage your money wisely so your money does not manage you.  And always live well below your means.

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  • Marc,

    Great points to know and follow. Living and saving someday does not happen, starting now is always a best policy.


  • In my limited experience, this sort of blunt advice is just what people in debt need. Heck, it’s what I needed to help me turn around (and still need to keep the motivation).

    Excellent summary of the main reasons people find themselves in debt. Obviously, most situations are a combination of these (probably a combo of MOST of those).

    Even turning the tide on one, will help lead the charge against the others. I love seeing this personal finance content from you. Keep it up!

  • I used to be guilty of the first point. It’s a habit developed overtime by the lack of perceived value of money. Thankfully i have got rid of the habit. The way of getting rid of the habit is written plainly clear by Marc. Just avoid the mall and you’re money is safe in your wallet :)

  • What is a life without vices?

    There is a line between being responsible adult and looking down your nose at others. Good list, but preachy.

  • I only disagree on this one: “You buy a brand new car every few years.”

    At least in my country you must do it to avoid losing (a lot of) money. As the time passes your car worth less, then you have to use it as payment for a new car before it’s too old that becomes too expensive to fix.

    Changing car is a great way to make money. You start with a ‘low budget’ car and end up with an almost luxuous car (after some years). That’s how I’ve got an expensive car. I would never be able to pay one if I’ve kept my past cars for more than 5 years.

  • Did you forget about student loans?

  • @zengirl: Excellent point. If not now, then when?

    @Baker: Thanks for the kind words. We’ve been enjoying your recent blog posts. Keep up the great work. ;-)

    @Ryan: This post was a bit ‘in your face’ on purpose. I’m certainly not looking down my nose at anyone. Money management and debt is a common struggle for all of us. Angel and I have had our fair share of financial debt problems in the past as well. I’m just hoping this article gets the point across.

    @Guilherme: New cars depreciate so rapidly here in the U.S., so it’s hard for me to comprehend how you could be saving money in your country by purchasing a new one every few years. If you have time, please share the details with us.

    @Kerr: I didn’t forget about student loans. I look at student loans as a means to an end… a means to a better career that allows you to pay off the loan and prosper well beyond your initial investment. Although my outlook may be overly positive. ;-)

  • HI Marc,
    What an informative read this was. I am not very good with money…i mean saving it. I’ve often struggled with this issue of saving. When i did realize, how important it was to save, i bought a little know the ones that have very very confusing locks…and started literally saving. And the one thing i did first…was chop off all my credit cards.
    Today i can safely say all my debt is in check…..and i intend to keep it that way.
    But your pointers are super! They are certainly gonna be helpful when i think i am getting attracted towards the debt trap again:)

  • a great list of activities that suck our income and lead us into debt! I think unconscious living and not knowing the difference between what is an income generating source and what is income depleting source is the root cause of getting into too much of debt.

  • Great article! This is one I’m totally guilty of:

    “You own (or rent) way more house than you need.”

  • I liked the post. After reading it I think I’m doing fairly well. I drive a Hyundai Elantra which was about 3K less than other cars in the same class. I also use Quicken to track all of my expenses so at least I stay on top of where my money is going. I get up at 3:45AM to go to the gym each weekday so the health part is taken care of. Our house is fairly small but big enough for our family and my 401K contribution, although not as high a contribution as I want it to be, has been automated for years.
    I haven’t stopped the drinking thing though and I’m not really sure I want to… :-)
    I still know a lot of people even today, in this economy, who have to have all the toys. You wonder where all the money comes from (probably plastic).

    Wow, I feel so much better now on this Monday morning. I enjoy your blog…

    Bob Bessette

  • You are right! We’ve taken on so many bad habits that a simple second glance of logic would have told us we are going in the wrong direction. But we continue to be enticed by slick salesmen, trendy friends, and “so hot right now” celebrities to dictate how we should live. I hope this list inspires people to be an individual, to not follow the crowd into debt slavery, and to stay away from debt. Keep up the good work!

  • That is SO true.

    I had a lot of those attitudes when I was in debt. Granted, it was student debt and I was a student with no clue of what personal finance meant, working a full-time job…….. but these ALL RING TRUE.

    Great post.

  • “A car is a means of transportation to get you from one place to another.”

    For some, yes, this is true. For others of us… It’s waaaaay more than a way to get around, it’s an extension of self. The difference? I spend a lot of money on my cars. Cash money. Money I have available to spend because everything else is paid.

    Cars are definitely my vice… But only because I can afford them. Most seem to think we have some glamorous life to go with it, but we really don’t. It’s all there is to it, for the most part. :)

  • Good reminders. Thanks.

  • Awesome article!

    You know sometimes, debt can be good. I used that as (the “away from”) motivation for myself.

    About 2 years+ back I took on over $20,000 of debt by paying for seminars with money I hadn’t yet made with my credit cards.

    It was a risky move but I know I was investing in myself, investing in my personal development and financial knowledge and I know it was bound to pay off… so I did it.

    I’m glad I was right. I’ve since made many times my investment back… wrote an article about it here:

    Of course, this is not for the faint-hearted.

    Now Marc, yes, I understand you’re talking more about retail debt here. This is really a thought-provoking article so I just wanted to offer an alternate view.

    Shun Jian

  • Rahh! It’s very tempting to buy stuff we don’t need… or use money that’s given to us in advance.

    Being in the red ain’t fun. And its surely one heck of a hard time pushing forward to getting back to black!

  • Great list Marc. One by one I’ve eliminated most of these problems.

    One great tip I heard about money management is this:

    Don’t be tempted to raise your standard of living every time your income increases.

    Most people do this, which means they’ll always be feeling the pinch no matter how much they make.

  • Another: You have medical emergencies without insurance covering them.

    It would be interesting to see how much debt has accumulated from un- or underinsured sufferers of emergencies. Those numbers don’t exist, alas.

  • I have one to add:

    You didn’t protect your ass(ets) with an emergency fund and insurance policies for catastrophic events.

    Without a back up plan, one accident or medical issue or lawsuit can bankrupt you and your family. Expect the best future, but have a plan for major what-ifs in place.

    Great post. Will tweet!

  • You missed Eating Out. I have friends that eat out almost EVERY meal and complain that they dont have any money. Eating at home if better for your health and saves you ALOT. Even if you eat just fast food its at least $5 per meal which could be $300ish a month. More young people these days need to learn how to COOK!

  • I’ve noticed that student loans start a cycle of debt that leads to the behaviors discussed in this article. You start with student loans, so you’re comfortable with that debt. Which leads you to be comfortable with other kinds of debt… I’m not saying all debt is bad, and I know that student loans are a means to an end. But I also see them as the key that opens the “debt door” for many.

  • You are in debt because of your habit of thoughts. To end your incessant spending you need to think of money differently. People link positive feeling with spending, and anxiety with saving. Instead, apply your mind to think of saving as doing something great. Attaching positive emotion to saving and negativity with spending unnecessarily. Do this or about 30 days and you will change the way you perceive money.

  • The only thing I’m guilty of is investing to conservatively, but I make up for it by saving more. About winning the lottery…I never play; but since I was struck by lightning once, perhaps I should. I might have a chance. :-)

  • Wow! I love the kick-in-the-gut style! I know quite a few people that need this forwarded to them.. :)


  • Silly me! I thought it was the bills that medical insurance refused to cover. My cousin is now stuck with over $250,000 in bills for treatment of her third stage ovarian cancer that her health insurance decided not to cover 6 months after they approved the treatment.

  • Great post.

    Its interesting, I used to look forward to a new purchase, like a car and think that my life would be totally different once I had it. Now I realise, that it actually makes little difference. Remembering this makes it much easier to resist buying things for the sake of it.

  • Another avenue of haemorrhaging your bank account is to get caught in expensive litigation. I know this from first-hand experience involving family property. At the end of 2 years of legal bills, I’ve given up about 1/6th of my annual income to lawyers. Miscellaneous expenses such as travel, unpaid leaves and time lost are unaccounted for.

    It often isn’t a choice, but if you have one, avoid legal hassles like the plague.

  • Good post. I love the cars one. Its actually a hunch of metal on 4 rubber tires. I love watching people wash, buy new cars, and think they have it made. I’d rather drive my mechanically sound clunker, than be in debt. And the sunglasses. I love the people paying so much money to try to look like a movie star with money. Its all about attention. People who need the attention, didnt get it from mommy growing up.

  • Hi Marc,

    Great list! Buying things that you don’t need to have is a common problem that people face. Using credit cards to buy things that you can’t afford is a huge mistake. If you can’t pay the full amount of the item in cash, most probably it isn’t something that you should get.


  • Hi Marc,

    I like the list and agree totally. Personally, I’ve made some of these mistakes (as I’m sure we all have at one time) but can look back and say I’ve learned some valuable lessons from them. I’m done trying to keep up with my peers and will instead focus on what’s in the best financial interest of myself and my family.


  • This is a tough post to comment on. While my conditioned mind would agree and tend to focus on what ‘I’m doing wrong’ and ‘being continually in debt’, I believe that, to a large degree, what needs to occur first is a shift in one’s thinking and beliefs surrounding and about ‘money’. I believe it needs to be a two-pronged approach– our outer circumstances are a direct result of our ‘inner circumstances’…everything starts inside, in our minds: thoughts + beliefs = behavior.

    While improving poor ’spending’ habits is important, no one will ever achieve great wealth if they have poor (limiting) beliefs about money to begin with, such as:

    -I can’t afford anything (I want, I need…)
    -There’s never enough money
    -I’ll never be out of debt
    -I’m not good with money
    -Money doesn’t grow on trees
    -Money is the root of all evil
    -I’d be okay with just being ‘comfortable’
    -You can’t be spiritual, nice, or kind AND be wealthy
    -People who want more (money, things, etc.) are selfish
    -Rich people are jerks
    -I’ll never make alot of money
    -You have to work hard for money
    -I’m just not good enough to have/make alot of money

    It is a fact that people who are truly successful with money, and are able to amass great wealth, think differently and behave differently. This is why so many people who win the lottery don’t stay ‘rich’ for long and others like Donald Trump can go bankrupt and come back from disaster– wealthier than before.

    ps: if you were money, would you want to flow toward someone who believed you were a problem or evil? :-)

    Just some food for re-thought…

  • I think you make some good points. I have been helping my girlfriend get out of debt and I believe in a lot of what you are saying.

    However, you leave out an important point: HAVE FUN. “Always live well below your means”…this is good if you’re in debt, but once you’re out of debt and have a strategy to save the money you’ll need later in life and for emergencies, then SPEND SOMETHING! Go buy that entertainment system you always wanted. Why not? If you’ve got the money and you’re sticking to your financial goals, then you should use the extra money to indulge yourself once in a while.

    My only other suggestion is in reference to your comment about buying a new car every few years. I was guilty of always leasing cars, until I decided I didn’t like always having a car payment. Instead of buying a new car, I bought a Certified Pre-Owned. Best thing I could have done. It’s typically at least half the price as new, has low mileage, and is in great shape. The warranty will cover most of the problems you’ll encounter, and the resale value will be better a few years down the road than if you had bought new. A new car depreciates in value approximately 55% over the course of 3 years. Not only do you get a like-new car, but if you get a short-term loan, you’ll have it paid off in a few years and should have a pretty decent trade-in value!

  • I have heard the choir of angels signing… Everything you say is so true. Thanks for the eye opener and tactful scolding. ;-) Love it!

  • As my financial awareness grew stronger I noticed the oddest thing… among the people I knew how obvious it was who had their finances under control from those who were in debt. The people who were in control valued the money they worked hard for and took very good care of the items they bought, compared to those in debt….wall to wall clothes on the bedroom floor, constantly messy house. I’m not sure what the Dr.’s would say but I’ve sure been trying to keep my house clean!

  • We paid off everything but the house a few years ago, and having that freedom from debt allowed us to really go after our dreams. In one year we will have saved enough money to take a year-long (at least) trip around the world without working and without worrying about bills.

    After setting up plans to pay off our credit cards, we started working on our daily habits, like eating out. We were actually embarrassed to see how much money we had been spending on that one activity! We got rid of one car and own the other one, and we’ve set our lives up to fit with our goal of traveling full-time, which makes it easy to say no to trips to the mall or new furniture.

    When you know what you want out of life, you will spend your money and time to make that happen. When you don’t know what you want out of life, it is easy to spend your money and time on junk. And then when you do figure it out, you have to get out of debt to make it happen! So be smart and get out of debt now, even if you don’t know what you want to do long-term. Having the freedom to make those decisions is the true definition of wealth in my book. Thanks for the great post - I’ll be sharing it!

  • […] This Is Why You Are In Debt. Ever wondered how and why you are deep in debt? Chances are you have engaged in at least a few of the behaviors described in this post. (@Marc and Angel) […]

  • I like the list. I LOVE that you suggest skinny dipping!

  • SO true about divorce. I have two friends that are in the process of leaving their husbands because they aren’t happy. Of course no one knows what a marriage is like, but both husbands seem nice. They both have many small kids too! And, neither woman has a great job and neither husband is a millionaire. I have no idea how they expect this to all work out financially. I imagine in ten years or so they will totally regret divorcing.

  • The main source of trouble to me is my credit card. Since shopping and services can now be done online, I become absent minded most of the time.

    I will take the print-out of these points and see them over and over till I get rid of this mess.

  • Great article - people need to live within their (credit) limits (pun intended).

    If you’re badly in debt, cut non-essential services like phone and cell phone, you can use email instead. It’s inconvenient but it’ll also save you money and cut the calls from telemarketting and creditors calling to get repaid.

    Also you may want to purge your television and magazine and cable tv subscriptions. You’ll save loads and you don’t have to sacrifice your entertainment for it either - just make sure you keep your internet and use services like hulu and to help stimulate that tv craving.

  • Marc, this is a very powerful post that’ll jolt people who are in debt into understanding why they’re in a state of debt. I’m brought up in the Asian society where the value of saving is extremely strong, so I’ve never run into the situation of debt before - something I’m thankful for. I do think however that one’s relationship with money reflects the value one is providing to the society, so as long as I’m focusing on value creation, I don’t see money as an issue.

  • wow, lot of comments for what I thought was a middle of the road post! Anyways one point I don’t seem often mentioned is a lack of savings. When you don’t have savings the only way to cover emergencies is credit cards.

    this year was a rough year financially, but because we had savings I was able to continue paying off debt while still paying for everything cash. Of course the negative is we had to drain our savings completely, but still it was worth it.

    btw savings are starting to build up again.

  • I like this! Straight to the point. :-)

  • Sometimes, I just need someone else to say it for it to really hit home with me and become true.

  • […] This Is Why You Are In Debt written by Marc from Marc And Angel Hack Life.  I recently just found this blog and I am so glad I did.  This blog is LOADED with tons of helpful information to make your life easier, and more enjoyable.  Here’s an excerpt from the article: “Please remember, financial debt can be avoided and erased.  It just takes a little effort, education, and determination on your end to make it possible.  So as I’ve said before, live a comfortable life, not a wasteful one.  Do not spend to impress others.  Do not live life trying to fool yourself into thinking wealth is measured in material objects.  Manage your money wisely so your money does not manage you.  And always live well below your means.” – Marc […]

  • Great stuff! On your last point: divorce also kills. It’s a huge stress and causes many people to die sooner. Most churches/places of worship, offer FREE pre-marital counseling. Just think, you might save money on an engagement ring when you find out your potential mate and you are on the wrong page.

  • Harsh but true to the core. Sometimes the toughest words are the best and most needed.

    Thanks for the kick in the pants to get financially sound.


  • this is a great article for some things but i think it’s a little unfair to suggest to not get married incase you get a divorce. Sometimes things happen and you do end up divorcing the one person you thought was your soul mate….maybe other helpful suggestions for those that are already in this mess. Obviously people would want to avoid marrying someone they won’t be spending forever with, there are more than lost finances involved after all!

    I agree that student loans are a means to an end but at the same time, students still need some guidance surrounding this. Sometimes everyone who takes out a student loan might not even get to finish their courses as life gets in the way with deaths, illness and accidents.

  • Awesome straight forward post. Too often we beat around the bush of excuses. If we would face our true mistakes, we would be able to correct them much sooner.


  • one day at a timer
    September 26th, 2009 at 9:29 pm

    comprehensive list…..guilty of a couple, but working to get my debts paid in full…

  • Marc, I found your website about a week ago and have been indulging within the archives. Many great points in this article and lots of others i have read! I think a lot of us subconsciously understand things but need someone else to either remind or reiterate them for us. I am going to strive to live below my means!

  • You missed: You don’t have a job.

    In today’s economy, it’s a growing probability.

  • This article is definitely holds a lot of truth, but isn’t it ironic to have a Discover Card advertisement at end of the article.

  • While these are good reasons, some people are in debt because they took a risk on a business or some other type of investment. It happens. Or maybe someone took their savings to move to another state to begin a new life, but for some reason it didn’t work out. Of course, Neale Donald Walsch would probably say, “The problem was you took yourself with you when you moved.”

    I think people are in debt for various reasons. Sometimes, it’s not for a ‘black or white’ reason like overspending.

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