CAUSES OF DEBTS
Before we dive into the causes of debt, we need to first of all know what Debt means.
Different definitions of debt:
-Oxford Dictionary defines Debt as "a sum of money owed by one person or organization to another."
-Merriam-Webster*: Debt is "an amount of money that is owed or due."
-Investopedia defined Debt as "an obligation or liability owed by one party to another."
-Cambridge Dictionary defines Debt as "an amount of money that you owe to someone."
-Encyclopedia Britannica defines debt as "a financial obligation, typically involving a repayment schedule."
THREE MAJOR CAUSES OF DEBT.
- A SCARCITY MINDSET: A scarcity mindset can be said to be a persistent feeling of not having enough, whether money, connection, time assets, etc. A scarcity mindset affects your decision-making process; it limits your ability to plan, think, focus, or start anything. Because your brain is too busy thinking about what you don't have, what you think you ought to have.
I remember one time in my life when I wanted to have more of everything, more clothes, shoes, bags, any reigning thing that year, because my mind was telling me that I didn't have enough and it made me run into debt because I wanted more, until one day, i went to my friends house and I saw how few her things were and she was living so happy and being optimistic about the future, i asked her, why she isn't having tbe desire for more and then she told me that chance and time happens to everything, that when the right time comes, all those things will come on their own accord, from that day till date, my mindset changed because I know was going to have more than enough. We trade our future for a"living Large lifestyle today"
2 . SELF-ESTEEM ISSUES: Self-esteem issues normally lead to overspending. People with low self-esteem normally overspend to improve their self-image. They believe that buying expensive items will make them more attractive and acceptable. Tying your self-worth to money and material things has a negative effect not just on you as a person but also on your financial life.
Wanting to own things to please and impress people or feel among others will lead to a massive debt because you will want to do anything to keep up with the trend.
Also, always trying to prove to people that you are not strong can ruin your financial life, and it will lead to an unavoidable high cost of living. Sometimes, we buy things we don't need with money that we don't have.
3 . LACK OF FINANCIAL LITERACY:Lack of financial literacy leads to poor budgeting choices, not having emergency funds, not planning for the future, and not having good savings plans. More money is not a solution to poor financial management. If you are financially inclined, you will not know that there is money for savings, money for investment, money for emergency funds, and money for investment.
But by the time you know about all this, you know what each Money is used or is to be used for.
HOW TO AVOID DEBT.
Get to know what's working for you at a given time in your life, and live your life on your schedule.
Stop trying to keep up with others rather than keep up with yourself.
-Proper budgeting, proper budgeting can never be over-emphasized. Live within, if possible below your earnings, be contented with what you have, and work towards achieving more
-Define what wealth means to you, with your definition, you would have to live within your wealth blueprint or plan for your life.
-Surround yourself with positive people. If you find yourself amid people who constantly remind you of what you don't have, what you ought to have or have gotten, it will affect your financial life.
Your environment and association matters also in your Financial Life
-Read books on finance, money, and wealth; it will keep you informed. Also, follow people who are scaling through that path, Have a financial coach, have an accountability partner, and be accountable to them and yourself.
If you have anything to add, please share your thoughts in the comment section.
Thank you.