Why do People get Deeper and Deeper into Debt

How does it happen?  Why to everyday normal, sensible people find themselves sinking further and further into personal debt?

The answer is not a simple one but here are a few common reasons:

  • Australian money culture has changed its money psyche from saving to spending
  • Because cash is largely absent from the purchase transaction, we have forgotten the old fashioned art of saving
  • The credit card is the new emergency fund and it seems that everything is an emergency
  • We are bombarded by so much choice of ‘stuff’ to buy
  • Addictions divert money away from wealth building to create debt
  • Handing over hard-earned cash has now been replaced by a mere click, tap or wave of a card or smart phone
  • Instant credit is so easy to get and comes as plastic or a phone app
  • Most people do not understand how a credit card actually works (e.g. rate, interest free days, billing cycle, what minimum payment means)

Because most people don’t do a budget or plan ahead with their money, they don’t realise that they are drifting off track with spending until it is too late.

The answer of course lies in a basic understanding of managing money.  Whilst earning is the source of all personal wealth, it is saving that is the foundation of prosperity.

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