Common causes of debt problems

Are you wondering why some, if not most of the consumers are in debt, while others are seemingly enjoying life by being debt free? The answer is simple: credit discipline. But attaining credit discipline is easier said than done, what with so many liberal credit card issuers and/or financing/ lending companies that are giving pre-approved, easy-loan and sometimes so aggressive that they literally entice us to make that loan or make that purchase.

The ease of getting credit or loan makes people feel that they have power and control. To make matters worse, consumers are oftentimes made to feel guilty for not having 2 or 3 credit cards or for not using a credit card at all – as in “sayang ang points”.

This is like the sale madness we have practically all-year round. Although this is good for the economy because of the increase in consumer spending, it will have a whiplash if there will be also increase in delinquency and past dues. No wonder every day, our interest rates are high and our courts are full with BP 22 (bouncing checks), sum of money and collection cases.

If you are wondering why some, if not most of the consumers are indebt, here are some of the “most common causes of debt problems”:

(1) unrealistic expectations

(2) easy access to credit

(3) too many credit cards or store cards

(4) not having the income to support wants

(5) moving loans from one company to another

(6) not paying off loans before getting more things

(7) feeling a need to have what others have – as in “matching the Joneses”

(8) children's wants and giving in to them

(9) loss of job

(10) loss of income

(11) changes in family, e.g., new child

(12) separation from or loss of spouse

(13) not having money set aside for an emergency and

(14) not having the financial literacy among others.

In essence, the two (2) most common reasons for debt problems with today's ordinary people are first, too much availability of credit and second, compulsive and irresponsible spending. Most spenders have little idea of how much their purchases really cost because they use credit cards. In his book, Debt-Free Living: How to Get Out of Debt by Larry Burkett, he offers three (3) personal traits that lead to debt: First its because of ignorance. The ignorance here refers to a lack of understanding about the true nature of his/her financial situation, and sometimes a kind of "living in a dream world" approach to financial matters. False perceptions of what can be handled can get us in trouble, especially during big spending times such as Christmas. Second is indulgence. Indulgence must obviously be one of the worse downfalls of a "fast food" society that believes they should always "have it your way" and "get it in thirty minutes or less." We have trained ourselves not to wait if we don't have to, and we often and easily give in to the need for immediate gratification. And finally, poor planning. Poor financial planning can lead to overspending and deeper debt. People should take responsibility for their own financial affairs. People fail to plan because they may feel they do not have enough income or financial assets to consider planning. These are the kind of people who have the tendency to always procrastinate.

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