Surprising reasons you’re in debt
Having difficulty determining the root cause of your debt? Discover these five surprising causes of financial problems.
We all know that making the minimum payments on a credit card and taking luxury holidays could get us into debt.
However, there may be other less obvious reasons you can’t dig yourself out of a financial hole.
If you’re constantly wondering why you’re in debt, check to see if you exhibit any of the following behaviour.
You have successful friends
As an English graduate, I know this one well. While my friends with IT and law degrees found lucrative City jobs, I opted for the media route and probably earn a fifth of their salaries.
If the people in your social circle are high earners, they probably want to jet off on city breaks and eat at five-star restaurants. Being tempted to share these habits can get you into trouble. Nobody wants to be the cheapskate suggesting house white instead of champagne.
You stay in too much
Sacrificing nights out could seem sensible if you’re trying to pay off your debts. Ironically, this could end up costing more than going out on a budget.
Sitting around the house breeds boredom. To entertain yourself, you could be tempted to treat yourself to a DVD boxset and a bottle of wine. Even an evening online could result in unnecessary purchases. Although you plan to cut the cost of your home insurance, do you end up trawling through eBay?
You’ve moved down South
If you’ve relocated from an area where housing is relatively cheap to somewhere pricey, you’ll probably have to adapt to more modest accommodation. This often happens when people make the exodus from North to South.
You might end up living beyond your means if the majority of your earnings go on rent you can’t afford. You could also end up overspending if you face higher prices in the pub in your new location.
You can’t resist a bargain
Hunting down special offers isn’t always a shrewd move as becoming too fixated on sale items could lead to unnecessary purchases.
If you live alone, you might buy food you won’t eat thanks to buy-one-get-one free offers at the supermarket.
Before you buy a pair of shoes in the sale, ask yourself if they’ll sit at the back of the wardrobe.
You’ve spent on a balance transfer card
Shifting your debts onto a balance transfer credit card could help you pay them off faster. However, your good intentions could have been undone by falling into the ‘negative payment hierarchy’ trap of spending on that card.
Some card providers weight your repayments to pay off the debt that attracts the least amount of interest first – the transferred balance. In the meantime, more expensive debt from purchases accrues expensive interest.
There is good news as credit card providers will no longer be able to pull this trick from the beginning of next year.
**This material is for information purposes only and should not be considered financial advice. We strongly encourage our readers not to rely solely on this content, but to seek independent advice when making financial decisions.**
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