Understand and Prevent the Most Common Causes of Debt

August 21, 2014

Common Causes of Debt

The vast majority of the population has, at some point, experienced debt. And many consumers find themselves asking: “How did this happen?!”

Knowing the most common causes of debt will hopefully help you avoid them. If prevention isn’t possible, this information can help you identify your areas of weakness and begin to establish a sound debt management solution.

An Imbalance of Income and Expenses

According to a Clearwater debt relief attorney, a poor income-to-expense ratio is one of the most common instigators of debt. Usually an imbalance occurs when a consumer sees a reduction in income, but maintains the same amount of expenses.

Some people might see the decrease in income as a temporary situation. They think there is no need to adjust their expenses right away; things will bounce back soon enough. In the meantime, debt starts to accumulate.

It doesn’t matter if the situation is temporary or permanent; the sooner you face reality, the better off you’ll be. As soon as you experience a drop in income, adjust your expenses accordingly. You can add back the unnecessary expenses as you see a raise in pay.

However, don’t add those expenses back in too soon. Another time consumers often see financial imbalance is when they are coming off unemployment or they get a better job.

Yes, your financial situation has probably improved. But don’t be too hasty to reinstate all the favorite things you’ve been deprived of. Make sure you gradually increase your expenses in proportion to your income.


A divorce is quite possibly the most expensive experience you’ll ever encounter—especially if there is hostility between the spouses.

Unfortunately, in addition to emotional distress, many financial setbacks can also accompany a divorce—like bankruptcy or foreclosure.

If you are considering a divorce—or are in the midst of one—it would be wise to contact a debt relief lawyer in addition to a divorce attorney. The two legal processes require different skill sets; your divorce attorney might not be able to assist you as efficiently as a debt relief lawyer can.

A Lack of Budgeting Skills

Sadly, many consumers have no idea where their money goes each month. There is no record of income or expenses. If this sounds like you, it is time to implement a monthly budget.

Don’t let the phrase “budget” scare you off. Proper money management doesn’t need to be complex. Simply list all your expenses and all your sources of income—then find a way to reconcile the two.

You’re likely to feel an immense sense of accomplishment once you’ve created a monthly financial guide.

Medical Issues

Debt issues are commonly associated with major medical problems. This can be caused by gaps in coverage, lapses in policies, or simply the decrease in income.

These days, most medical providers accept credit cards as a form of payment. If consumers utilize this type of payment plan, they can quickly succumb to the interest for such a large transaction.

Try talking with the medical provider. See if you can work out a manageable payment plan that is appealing to both of you.


Gambling can be one of the most dangerous sources of debt. It is addictive and the habit is very difficult to terminate. Plus, loans are readily available to anyone seeking them.

Unfortunately, most gamblers are looking for just “one more score” to help get their finances under control. However, true debt management and a path to financial stability can only begin once the gambler has the habit under control.

An Insufficient Savings Account

Many old timers abide by the saying, “pay yourself first.” There is more than a grain of truth to this wisdom.

The best way to avoid unexpected debts and expenditures is to have a financial cushion. According to a debt relief attorney in Clearwater, everyone should have a savings account with at least three to six months’ worth of income.

Poor Communication Skills

Debt often creeps up when spouses are unable or unwilling to communicate. A “spender” will be afraid to tell the “saver” about purchases. These little secrets pile up until the debt is out of control.

Family members need to feel comfortable having open and honest discussions about financial expectations—this includes children. If a marriage consists of both a “spender” and a “saver,” find a way to secure happiness for both personalities.

Insufficient Financial Knowledge

Unless you were a finance major in college, there is a strong possibility that no one taught you basic finance management skills. Unfortunately, even the smallest mistakes can be expensive and complicated to rectify.

Take the time to get a general understanding of money management—learn how to save, invest, and make sound decisions.

Hoping for Tomorrow

You might be surprised to learn that quotes like, “learn to live in the moment,” and, “tomorrow may never come,” apply to debt management.

Too many consumers find themselves in a debt crisis because they put their hope in the uncertain. That Christmas bonus isn’t a sure thing. Grandma might not have included you in the inheritance. Robbing Peter to pay Paul isn’t always a good idea.

Don’t spend money you don’t have. Sure, it will be devastating if that windfall doesn’t come through, but the situation will be a lot worse if you’ve already spent the money.

Managing debt is a challenge. However, nearly everyone has to deal with this unpleasant task at some point in their lives.

Learn to identify the most common instigators of debt so you can prevent them from happening. If you do find yourself in an unfortunate financial situation, identify what caused the setback and work quickly to rectify it.

If your debt becomes too much to bear, talk with a Clearwater debt relief lawyer; you may be entitled to relief via the legal system. If you’d like more information about debt management, fill out the form to the right. We’ll personally review your situation and help identify the most efficient debt relief strategy available.

author avatar
Michael Ziegler
Ziegler Diamond Law: Debt Fighters, provides effective legal services to consumers in Clearwater, Florida, and throughout the Tampa Bay area who are facing home foreclosure, unmanageable debts, debt collector harassment, or other debt-related problems.

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About the Author

Ziegler Diamond Law: Debt Fighters, provides effective legal services to consumers in Clearwater, Florida, and throughout the Tampa Bay area who are facing home foreclosure, unmanageable debts, debt collector harassment, or other debt-related problems.