Four Basic Habits That Will Keep You Mired in Debt

Being in debt is largely a matter of second grade arithmetic — if we spend more than we earn then we’ll get in debt; if we continue spending more than we earn then we’re likely to stay in debt.

The solution is to reverse the equation: Instead of spending more than you earn, start earning more than you spend. Put the difference against your debt regularly and soon it will be gone; continue stashing away the difference and soon you’ll have considerable savings on which you could retire and “live happily ever after.”

Who said there is no direct link between maths and happiness!

This would have been a really short article if I didn’t have a bit of a problem with simple arithmetic. But here is my problem: Arithmetic, just like any description, is very useful in telling us about the “what.” What is the current state? What is to be done? However, most action, and change, also needs the “how.” In other words, to get out of debt we need to figure out:

How do we stop spending more than we earn?

My answer to this is: By changing the habits that shape the way in which we manage our money.

Most aspects of our lives, including our finances, are habitual; in other words, most of the time we do what we usually do. Habits are what makes our lives possible; sometimes, however, these can become obsolete and hinder our existence rather than enhance our lives.

Being in debt is usually a signal that our money habits have become obsolete and it is time to revisit them. I believe there are four basic habits that keep us in debt; these are: ignorance, lack of balance, bad judgement and lack action.


‘Ignorance is bliss’ the saying goes. Don’t believe it!

Ignorance, in any area of life, is an affliction that needs to be remedied as speedily and efficiently as possible. This has never been truer than in the case of financial management and wealth building. Ignorance keeps us in debt in four different ways:

  • Ignorance about our personal financial situation prevents us from acting.
  • Ignorance about money and money management deprives us of choice.
  • Ignorance of broader economic developments makes it impossible to place our personal financial situation in context, understand and change it.
  • Ignorance can limit our earning capacity and keep us in low earning occupations.

You see? Tell me again that ‘ignorance is bliss.’

The remedy?

Albert Einstein once said the only thing that interfered with his learning was his education. I modestly agree. So…

To deal with the habit of ignorance start learning; and remember — learning is not a one off act; it happens in all kinds of settings. Get educated:

  • Check these financial statements, use technology to link and manage your personal bank accounts (including the ones about your debt), and work out your numbers (income, spending, net-worth).
  • Educate yourself about the fundamentals of money management and develop the personal habits that underpin responsible financial behavior.
  • Follow what is happening with the economy (in your country and the global one). Remember that the economy is very sensitive to politics.
  • Work out what competencies and skills will help you get a higher paid job and get educated for these.

Change this habit of ignorance and start now! But remember two things:

  • Education is about what you know and can do; ‘degree’ is about certification. Go for education!
  • Don’t make assumptions about the education that will bring the highest financial returns. Suffice it to mention that top accounting firms rarely recruit people with degrees in accounting; many of their recruits have degrees in classics, history and philosophy.

Lack of balance

A very long time ago the Greek philosopher Socrates said that the way to happiness is to observe moderation in all things. In this case ‘moderation’ was not about deprivation but about knowing ‘the norm’ and having the discipline to observe it; or in other words, to observe a certain balance.

In personal finance, just like in life, the path to financial health is a matter of balance. Achieving financial health is not likely without working out ‘our norm’ or what our ‘enough’ is. Working this out provides an anchor for balancing our decisions and actions.

Observing any balance is a precarious exercise and we can often fall into one or other extreme. For instance, losing our balance with food leads to obesity or malnourishment; losing our balance with possessions leads to clutter or scarcity. Losing our balance with money can send and keep us into debt.

The remedy?

Work out where is your ‘enough’ by deciding what is the kind of life you want and what do you want in your life. Remember that:

  • Money doesn’t make much sense if it doesn’t nourish your life; and
  • For a different future you should plan from where you want to be, not from where you are now.

Bad judgement

Many believe that we make decisions on the basis of facts; they are wrong. All our decisions are based on interpretations of fact, or on judgement. You don’t believe me? You’re welcome to a mental experiment: Think about the last time you heard a ‘fact’ and remember your response. It was a judgement, wasn’t it?

To make matters worse, we humans have almost unlimited capacity for self-delusion; which only means that many of our judgements are really bad. Regarding debt this can be: ‘Oh, I am in debt but I can pay it off at any time’ or ‘I’ll buy this [insert a useless object of your choice]. ‘I’m in debt but it is so large that whether I spend a bit doesn’t really matter.’

One of my all time favorites is: ‘I’ll deal with my debt when I get a raise (get my bonus, inheritance etc.)’; or waiting for ‘big bucks.’

I have news for you: it doesn’t work like that. People start paying their debt off when they have decided (judged) that they’ve had enough. After that, even the smallest amount put against it helps: We had $160,000 worth of debt and after paying it all off I noticed that the smallest payment was about $6.

How to change the habit of bad judgement?

Become mindful of your assumptions and change them when and if necessary. Experiment rather than assume.

Lack of action

There isn’t much to be said about this except that most people’s lives consist of selected intentions. How do I know? Well, I was there! And things started changing only after I started acting.

The remedy is also deceptively easy: start doing!


Ignorance, lack of balance, bad judgement and lack of action are habits that bar our way to financial health and keep us in debt. Changing these habits is hard but it is so worth it; in all senses of the word!

About the Author

Maria is the blogger behind The Money Principle: a personal finance blog that will ‘make your head hurt and your wallet sing.’ You can catch up with her on Twitter or FB.

Photo Credit: Stock Monkeys


  1. 1


    Ignorance is bliss until you realize the mess you are in and that it will take triple the time to dig yourself out of it. Unfortunately we all keep a certain level of ignorance in some part of our finances or life. Great post Maria!

    • 2


      Thanks, Pauline. You are right; I call these ‘carefully chosen areas of ignorance’. Like, I rarely think of the calories when eating a bar of lovely, smooth, milk chocolate. Still, I should :).

  2. 3


    “Albert Einstein once said the only thing that interfered with his learning was his education.” This is so true.

    When we think we know we (most of the times) stop learning.

    • 4


      Jai, glad you liked it; I was very taken by this quote myself – it has layers of meaning. And I agree with you – once we decide we know something we close the possibility for improving.

  3. 5


    “Being in debt is largely a matter of second grade arithmetic.” And along with the arithmetic I think we need to start teaching in second grade about debt and the remedies you recommend. Would make for some excellent math exercises!

    • 8


      In principle agree, Krant. But there is control and control. Not buying a coffee is one level of control; not getting this lovely Gucci handbag is a different one. And buying a poverty model airplane is also controlling spending. This is also important to remember – that it is in the ratio not the number.

  4. 9


    It’s arithmetic, alright. However, it’s the spender’s mindset to spend like there is no tomorrow. I strongly believe some folks ought to see a shrink. Many researchers have pointed out and commented on the spending behavior of folks.

  5. 11

    Ben says

    “Suffice it to mention that top accounting firms rarely recruit people with degrees in accounting; many of their recruits have degrees in classics, history and philosophy.”

    Stopped reading here, please list all the firms you know who don’t want people with accounting degrees and CPA certification.

    • 12


      What makes people employable is a very complex question (if you would like to know a bit more on what I have found about that you can read the following academic article As to listing the firms who recruit from classics and philosophy, my co-author who is a prof in accounting has access to data sets that show that all top four do. And they want people who know about accounting – they just think it is better to get in people with broad education and teach/train them in the ‘craft’.

  6. 13

    Lorn Austin says

    Being in Debt is really a stressful thing in today’s thing this is a very informative blog that describes how should we balance our earning and what strategy we should follow to get rid of the problem of Debt

    Lorn Austin

  7. 15


    For me, the big one is feeling like I “deserve” things. Thinking things like, “I worked hard this week; I deserve a treat,” is an easy way to make purchasing decisions I will later regret and that will hit my budget hard.

    • 16


      Oh, how I know this feeling. My way to deal with this one was that when I was weaning myself off spending stupidly, I made sure that I kept some of the things I love. Expensive perfume, for instance – which, actually only seems expensive. It is a good idea to deal with the ‘deserve’ mentality anyway – I find it can spill over in other spheres of life.

  8. 18


    I have to disagree on the hiring of top accounting firms. The top accounting firms hire accounting graduates or CPAs. I know quite a few people that work in the top three firms and they’re all accounting degree holders. They really don’t have time to train people on accounting skills. Colleges do that. It is the same for Engineering or the top Medical jobs such as doctors, PAs and nurses. They have to be trained in colleges and certified in their specific specialties before they can work in their fields.


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