Endless cycle of debt?


debt cartoon

68% of Americans in debt doubt they’ll ever pay it off, according to a recent creditcards.com report. That’s a fairly alarming statistic and a really pessimistic view on life. I’m not denying there are real challenges/reasons for going into debt: medical debt, student loans, unemployment, etc.  These are real issues and real problems. My trite observations won’t magically fix all of these societal deficiencies; however, I don’t want this mindset to become an excuse; a reason for putting off the necessary and pragmatic steps – that you can take – to become (and stay) debt-free.


I believe the debt mindset is an excuse (for some) to spend beyond their means, because debt is a fait accompli (an unavoidable circumstance). If you accept that something is unavoidable then you don’t have to do anything about it (i.e., change your lifestyle) – just sing kumbaya (to achieve interpersonal harmony) – around a campfire of course (do you hear the crackle of the fire?) – and roast some marshmallows while you’re at it.


A permanent debt cycle is not something that I believe you should merely accept as part of your life. Permanent fixtures in your life should be faith, family, friends, not debt.   .     .


Having said that – many people reading this post will say my previous rant was nice and all, but also very irrelevant (and inconsequential) – they can’t change the past! – they already have debt. Chances are, that describes most of you. So what now?, Even if we accept the premise that debt is unavoidable (a debatable, but moot point for most); what’s the “procedure” if we have already become a victim of the debt monster?


Let’s tackle this particular quandary in two stages: 6 causes of debt (hey – some younger readers might have thus far managed to avoid the debt star), and 6 steps to help reduce/eliminate debt (if you already have it).  See a totally irrelevant (but really funny)  bit on a cannonball wound (Brian Regan)

Let’s start with some of the most common causes (per bankrate.com):


1)            reduced income/same expenses; i.e., living beyond your means and letting credit cards fill the gap. When your outflow exceeds your inflow then your upkeep is your downfall.


2)            medical expenses; probably numerous causes here but I presume lack of or lapse in health insurance are leading causes – along with chronic conditions.


3)            poor money management; not having a budget and generally not being aware of where the money went .   .     .


4)            saving too little or not at all; living paycheck-to-paycheck; spend it all baby! This becomes a significant problem when combined with an unexpected expense (e.g., roof replacement). Houston – we have a problem.   .     .


5)            underemployment – I’m going to consider unemployment in this category too. Close cousin to #1. For whatever reason, whenever you are unable to find a full-time occupation.


I’m gonna add 1 more bonus category (because I want to)


6)            student loans – seems like a common cause – at least anecdotally, and I was surprised it didn’t make the list anyhow.


I’m going to add some commentary on each of these common 6 debt causes and how to avoid – and deal with – these conditions (after your debt affliction).


1)            set (and keep!) a budget – be able to quickly adapt your expenses to your lifestyle (don’t over-spend).   Set and monitor your budget with mint.com. Start with the heavy hitters: housing, transportation, and food (these 3 probably make up 2/3rds of your budget anyhow). Having an emergency fund also really helps, should you experience an unexpected expense. Sometimes expense mitigation isn’t the only solution, you might also need to take a second/part-time job to increase the income side of the equation. If your household income is less than $50,000, I would submit that expense management might not be the only/best way to balance the budget.


2)            insurance – I strongly recommend that you consistently carry health insurance. Don’t let it lapse – even if you have to take out a cobra/continuation policy. If you already have medical debt; work with the provider to setup a reasonable short-term-arrangement (over communicate if necessary; don’t be an optimistic procrastinator – it won’t go away on its own). Work a part-time job, if necessary, to pay off this debt as soon as possible. Review the charges and make sure they are reasonable and customary – I know it’s time consuming but hospital billing errors are more common than you might think.  I also recommend you contribute to a health savings account to have a medical emergency fund.


3)            mint.com or everydollar.com; also see answer to #1


4)            start with a $1,000 emergency fund – sell some household goods if you have to. If you truly can’t save anything (with your current lifestyle) then I suggest you review your housing (might have to downsize/move), your transportation (might have to sell/trade), and food (I would avoid eating out/restaurants). See previous post on “my expenses are too high”


5)            I probably can’t answer this quickly and definitively for everyone. Might need to go back to school and get a different degree. Might have to move or commute to a better job location. Might want to read “strengths finder 2.0” to get suggestions on occupations you’re best suited for.   See previous post on preparing for a possible job loss


6)            student loans.   This is probably a sticky wicket – or a hot mess (if you are in the south (like me). There are ways to avoid student loans: scholarships, community college (at least for the first two years), in-state tuition, part-time job during school, military service before college, and trade schools (e.g., HVAC technician). At least think about it. If you already have student loans: Refinance to a lower interest rate. Work a part-time job and pay-it-off as quickly as possible.  Get fannie mae out of your life!


To be honest, being successful in personal finance is a whole lot more than just a math problem; It’s a motivation problem. You have to really want to get out of debt. It’s going to take hard work and sacrifice. If it was easy, everyone would have already done it! I don’t want you to rationalize debt just because most of your friends have debt. Staying in debt isn’t the smart thing to do. Be different. Be weird. Be debt-free.  Think about all the things you could do with the money you are currently spending on debt – go ahead – dream a little – now go out and make it happen!


Set some goals to get out of debt, goals that are:











I’m going to take my own advice and set a goal to pay-off our remaining car loan.  We currently owe $22,658 (as of 1/1/18) (I know, I know – go ahead and roll your eyes at me.    .      .).  I’m setting a goal to pay it off by July 31, 2019.  Beginning in February I’m going to start making double payments – the 2nd payment will be principal only.  That won’t be enough fire power to get it done by July 2019 (that’s only 18 months – yikes) – I will have to also throw in some “found” money – tax refunds, bonuses, etc.  You can do it!

get mad

This is Sparta!  I know its random but I needed some motivation, so work with me.

One thought on “Endless cycle of debt?

  1. Pingback: My favorite posts in 2017/2018 | Jimmysmoneytips

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