Does Earning More Really Solve Personal Debt Problems?

It’s hard not to think that all your financial problems would go away if you were earning just a little more money. It’s especially easy to think like this when you’re up to your eyeballs in debt and still have the regular expenses to think about.

You may think debt comes from lack of money, but the truth is that in many cases debt comes from your behaviour. This means that there are times when more money will be the solution, but there are other times when it won’t be.

When More Money is the Solution

Your debt problems could be because you don’t earn enough money. If you have to incur more debt just to meet your basic needs, you’re on a dangerous path and you have to do something about it. In this context, basic needs are the basic necessities you need to survive such as food, rent, gas, and the like. It doesn’t include luxury things such as the latest smartphone, or a vacation package that you desperately want.

If you’re incurring debt just to get by, you have an urgent need that can be fixed by having more cash. In this case, you’ll want to consider taking measures such as asking for a raise, getting a part-time job, working more hours, getting extra training etc.


When More Money isn’t the Solution

Having more money will not be a solution if your debt is mostly behaviour induced. Behaviour induced debt is when you spend more money than you can afford on things you don’t need. Many people with behaviour-induced debt will have the following qualities:

  • They think debt is a normal part of life.
  • They do not track their expenses.
  • They have no idea if they spend more than what they earn.
  • Their expenses are heavily reliant on credit cards.
  • They believe a good credit score is the most important thing in being financially stable.
  • They do not believe it’s possible to make a major purchase in one payment.

If the person described above was to start earning more money, this would only empower their borrowing as they would likely start to believe that earning more gives them room to make greater use of their credit cards.

Many people are in debt not because they have to be, but because they lack financial discipline. Such people will not be helped by earning more. If you’re in this position, it’s time to start thinking about your debts more seriously, and here’s a good start:

  • Work on how you’re going to pay off your current debt.
  • Do a proper analysis of your expenses and subtract those you don’t need.
  • Before you incur more debt, use online tools to help you know how much your repayments will be, and how long it will take you to pay off the loan.

With the right financial discipline, you may be surprised just how far your current income can go. Once you move away from a ‘debt’ mind-set, you may realise that you didn’t even need most of the things that got you into debt.

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