Why Debt Piles Up and How to Avoid Debt

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Debt can be overwhelming, especially when the monthly payments are getting harder to make on time. Sometimes it can feel like, despite your best efforts, debt continues to pile up. When struggling with managing debt, it’s crucial to recognize the common causes of high debt and to follow different financial planning tips.

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Problem: You aren’t keeping track of all your debts

When taking on a loan, you may be looking purely at the monthly payments and interest rates. If these are the only things you consider before moving forward, you overlook the current debt you already have and the other monthly expenses you have to make.

Solution: Understand all of your debt types
In properly managing debt, ensure that you have a proper and clear understanding of all of your loan types and repayment plans. Look at how much you allot monthly to your debts as a whole instead of looking at them individually to get a clearer understanding of how much you owe.

Problem: Insufficient financial planning

Without a financial plan prepared, managing debt becomes something you struggle with every month. No financial plan can make it easy to lose track of spending and miss payments. If late payments pile up, extra costs make it even more unmanageable.

Solution: Prepare a repayment strategy and monthly budget
Before signing off on any loan, plan how it will factor into your budget, income, and other expenses like mortgages, rent, groceries, and utilities. As a general rule, you should be left with 20% of your income at the end of the month after all expenses have been paid off. If this loan or debt will stretch you too thin for a long time to come, consider other options.

Problem: You aren’t sticking to your budget plan

Maybe you have a monthly budget plan, but you frequently compromise it for other expenses. This can lead to late payments, additional costs, and added debt to cover expenses. When managing debt, having a plan is not enough—sticking to it is crucial.

Solution: Take measures to discipline yourself in repayment
You can take different approaches to sticking to the budget plan you’ve created for yourself. This may mean setting aside monthly debt payments somewhere you can not access until payment day. There are also payment features you can take advantage of, such as auto-pay, that prevent payment delays.

Problem: You have a sudden change in finances

In some cases, debt becomes harder to repay because of circumstances that are outside your control. Maybe you lost your job, your income’s changed, or there’s a sudden medical emergency you had to pay for. These take up savings and make it hard to pay off debt.

Solution: Prepare an emergency fund
How to avoid debt in these situations? Set aside an emergency fund that you can use when unexpected expenses come up. This is one of the most helpful financial planning tips, since it allows you to stay afloat financially without compromising your monthly debt payments.

Problem: You are adding on new debt

Another common reason that debt piles up is that new loans and debt are added on before others have been paid off. It’s not entirely bad to have multiple debts at the same time, especially if these are good debts that will bring value later on. However, having too many at a time can cost more than you are financially prepared for, making managing debt impossible.

Solution: Assess your current debt and finances first
Before signing off on another loan, assess whether or not you can commit to it given your current finances and existing debt. If the loan is for a needed expense, consider other options such as debt consolidation, assistance programs, and tapping into your savings.

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Key Takeaways

Debt can pile up and become overwhelming without proper financial planning tips and a proper monthly budget. When trying to figure out how to avoid debt, exploring why it piles up is important.
Common causes of high debt are the lack of financial planning, keeping track of expenses, and a sudden change in finances.
Managing debt efficiently involves having a clear understanding of all your debt, having a financial plan that you stick to, and preparing an emergency fund.

References

Beattie, A. (2024, September 7). How To Get Out of Debt in 8 Steps. Investopedia. https://www.investopedia.com/personal-finance/digging-out-of-debt/
The Most Common Causes of High Debt. (n.d.). Atmos Financial. https://www.joinatmos.com/blog/the-most-common-causes-of-high-debt
Yanuar, H. (2025, June 26). Powerful Strategies! 5 Ways to Manage Debt that Piles Up and Makes You Dizzy. Treasury. https://www.treasury.id/en/powerful-strategies-5-ways-to-manage-debt-that-piles-up-and-makes-you-dizzy