It is no lie: having debt is frustrating.

We all hate debt and even the idea that we have to take out a loan and become indebted to meet some of our needs makes our stomachs churn.

We all want to avoid debt and get out of this financial pothole. But why are you still in debt?

What are you doing wrong?

Are there any mistakes you are making that are keeping you in debt?

What are your financial habits?

There are common mistakes that people make that still keep them in debt.

If your debt is still the same in the next five years or so, then you are making some common mistakes in managing the finances that keep you strapped with debt.

In this article, we will go over these common mistakes people make that keep them in debt.

It is very important to know what these mistakes are and avoid them so that you can eventually achieve financial freedom and independence.

25 Common Mistakes People Make That Keep Them in Debt

So what are these common mistakes people make that keep them in debt? Stay put. We will look at how to avoid 25 of these mistakes.

  1. Keeping the same spending habits 

This is a common mistake that keeps most people in debt.

If you have poor spending habits and you keep at it, then you will still be in debt.

Overspending and making impulsive purchases are the kind of spending habits that you want to get rid of if you want to get out of debt.

They will keep you in debt because you will always be taking out loans to buy those items.

If you are using credit cards, it is even worse for you because it is easy to overuse and abuse our credit cards.

  1. Not having an emergency fund 

You ask: what is an emergency fund?

An emergency fund is a money that you set aside to act as a cushion in a situation where you lose your current source of income.

This money is going to help you live off a given period of time until you get back on your feet.

Think about this for a moment: if you lost your job today, what would be the first thing you do?

If the first thing you think about is moving to a smaller house from the house you are living in then it means that you are making a money mistake.

You have to have an emergency fund that will last you 3 to 6 months to pull yourself back up.

Life happens.

Your business may fail, and you may lose your job or go through pay cuts.

You have to know that you are prepared when and if this happens.

If you do not have an emergency fund, you will keep on being in debt and that is a mistake you should aim to avoid.

  1. Not having a budget 

Budgeting allows you to create a spending plan for your income.

When you budget, you will create a list of all the important bills you need to pay and you will also avoid working outside the budget on things that you do not need.

A lot of people have said that budgeting has really helped them to escape living in debt.

They understood themselves and they eliminated unnecessary expenses and debts. If you are not budgeting your money, then you will inevitably be strapped in debt for a longer time than you can expect. 

  1. You stop contributing to your retirement savings 

If you are putting little money aside for retirement, then you are making a common mistake that will keep you in debt.

It is a general rule of thumb that you have to value your future self more than your current self.

This applies to how you maintain your health now and even how you manage your finances.

The more you save for your retirement, the brighter your financial future is going to look.

Do not skimp on your retirement savings at all. 

  1. Forgetting to pay your bills on time

Putting off your credit card debt is a serious money mistake that you must avoid.

When you are late on your credit card payment, the interest rate will start to accrue to your credit card balance and you will be paying more money than what you could have when you pay your money on time.

Avoid making the mistake of putting off your credit card debt, because you will have to part with a lot of money later on.

  1. Not saving or investing your money 

A lot of people love the idea of saving and investing their money, but very few people actually do it.

If you are not saving or investing at least 10% of your income every single month, then your chances of living in debt are high.

You could either be paying off expensive bills or you have poor financial habits that cannot allow you to put some money aside to secure your financial future.

If you are not saving or investing your money, you are really treading dangerous waters.

If you want to learn how to save, start reading financial books or work with professionals to give you a good head start.

Always remember, if you do not save or invest, you will, with no doubt, keep on being in debt.

  1. Lifestyle creep

Is lifestyle creep keeping you in debt?

Are you obsessed with keeping up with the current trends and fashion?

This is a common mistake people make that keeps them in debt.

Do not force an upgrade of your lifestyle.

If you are always concerned about how you are going to look when you have this car or this house and then you make bad decisions, you have to avoid this mistake.

You do not have to compare your life to anyone else’s or keep up with the Joneses.

A lifestyle jump is a temporary high that we take in our lives every time we get an income or our current income increases. If you do this, you will always be living in debt.

You have to adopt the habit of setting aside any additional income you get every year for saving or investing. 

  1. Spending a lot of money on unnecessary things 

I am an advocate for only spending your money on things that you need and not what you want.

Oftentimes when we spend a lot of money on things that are unnecessary, we end up taking out loans to afford them.

This is a very common mistake that will keep you in debt for the long term.

You have to avoid this if you want to manage your money effectively.

Only get what you want. Sometimes when you have to take out a loan to get something, you do not really need it. 

  1. Dipping into your retirement/savings account

If you are dipping into your retirement or savings account to pay a debt or fund your lifestyle, you are making a serious mistake that is going to keep you in debt.

Once you take a dip into your retirement or savings account for any reason whatsoever, your financial future gets crippled.

I always say that you must value your future self more than the current self.

You do not want to grow old and strapped in debt because you made the mistake of wasting away your retirement savings.

  1. Taking out cash advances on your credit card

This is a very risky mistake that keeps a lot of people in debt.

When you take out a cash advance from your credit card, interest starts to accrue immediately on the amount of cash you have withdrawn with no grace period.

You will also incur a cash advance fee, which is 5% of the advance.

These high-interest rates and the cash advance fee are expensive and you may find it difficult to pay them off. Making this mistake will keep you in debt for the longest time.

  1. Neglecting financial literacy

Financial literacy is a very important life lesson that is sadly not taught in the traditional schooling system.

If you want to understand how money works, then you have to invest your time into gaining some financial literacy skills.

Start with the basics and gain the necessary knowledge and understanding of various topics in personal finance such as saving and investments.

Get into the habit of familiarising yourself with these financial matters if you want to achieve financial freedom and avoid being in debt. 

  1. Relying too much on credit cards

If you use your credit card too much and you are not able to cause a dent in your credit card balance, you will be living the rest of your life in debt, trying to pay this credit balance off.

Do not use your credit cards to fund your lifestyle or use it for everyday expenses.

Your credit card balance will keep on growing and if you cannot pay it off in full, you will be left with high-interest debt and a low credit score to feel humiliated about.

When you use your credit card, make sure you prioritise what you are spending.

If you do not make a plan on how you will use your credit cards, you will abuse them and then end up living in debt.

  1. Not addressing the root cause of debt

It’s a rule of order that before you come up with a solution to something, you must know the underlying problem that caused it.

The same applies to debt. In order for you to avoid being in debt, you must know what is making you get into debt in the first place.

A lot of people’s main focus is on paying off debt and this is a mistake.

You have to know what got you into debt and what’s keeping you there if you want to see any progress being made.

  1. Not changing your overall financial behaviour 

Once you have established that you have been making some mistakes that are keeping you in debt, you have to make a plan to change these habits.

Ditch them for good.

If you overspend, abuse your credit cards or often buy big-ticket items on impulse, you have to change this behaviour.

Of course, when you change these behaviours you have to adopt good ones that are going to assure you financial success.

For example, saving and investing. 

  1. Ignoring your student loans

There are so many youths in Kenya who are strapped with heavy student loans because of their tendency to ignore student loans.

A lot of people say student loans are good debt, but the truth is, debt is debt.

Having debt means that you owe someone money and that is not good.

The fact that student loans have low-interest rates has encouraged the laxity of college students to pay off their student loans.

Avoid this mistake because when these low-interest rates compound over time, it will keep you in debt.

  1. Trying to do it alone

You do not have to do it alone.

If you are still in debt and you are finding it difficult to pay off your debt, find someone who is going to help you.

This person should be someone you trust and someone who has a well-grounded financial sense that you do.

They will not only help you to pay off your debt, but you will get insight for them on how to handle your debt better.

Avoid making the mistake of doing everything on your own because it will keep you in debt.

  1. Not increasing your income 

If you want to stop living in debt, you have to get into the habit of looking for different income streams.

You cannot just rely on your 9 to 5 job to get you to your financial goals and keep you out of debt. If that’s what you are doing, then you are as short-sighted.

To keep off debt, you need to widen your scope.

You can start a side hustle, and have an eCommerce store that you’ll be running aside from your normal job.

People who have an entrepreneurial spirit are the luckiest when it comes to adopting this financial habit. You have to earn money both actively and passively if you want to get out of debt.

  1. Paying off too much or paying several debts at once 

This is a common mistake that people who are in debt keep on making. If you pay off too much debt or pay several debts at once, you will have very little money to work with yourself.

As a result, you will find yourself borrowing loans for your daily needs before your next paycheck.

I’m not saying that you should only make minimum payments on your debt.

What I’m saying is that you should only make enough payments and always keep money aside that you can survive on before your next monthly income. 

  1. Focusing on less severe kinds of debt first

When you are paying off your debts, there is a certain criterion that you have to follow.

If you have student loans and a credit card due, it may be difficult to determine which debt you should handle first. That is why you have to have a good plan when you have to pay your debt.

You have to know the balances that you have on the debts and the interest rates.

You have to pay off high-interest-rate debts first and then go to the low-interest rate debts later.

Paying off the less severe kinds of debts is a common mistake that will keep you in debt.

  1. Switching your debt paying plans midway

Once you start on a debt-paying plan, stick it to the end.

Do not make the mistake of switching your debt paying plans along the way because it going to throw you off balance.

You do not want to start making progress and then lose track of how far you have come in terms of paying your debt.

You will keep on living in debt if you do this because you will lose the motivation and the rhythm that was keeping you going when you were paying off your debt. Just stick to one effective debt paying plan and go with it.

  1. Not checking to see if your credit report is correct 

Before you start making your credit card payments, you need to check your monthly billing statement.

Look at the transactions listed to make sure that they are accurate and that there are no errors or fraudulent activities going on.

Review the charges on your account every few times to make sure that things are correct.

If they are not, then you need to call the credit card company’s customer service and have them correct these mistakes sooner. You cannot be too careful here.

You may end up living in debt if you do not avoid this mistake.

  1. Running high balances

While it is not always possible to clear all your credit balances from month to month, it is a mistake to let your balances run high.

When you let your balances run too high, you will hurt your credit score.

You will also have very high-interest rates charged on the remaining balance that you have, which is going to be difficult to pay off.

If you want to avoid this mistake, do not just make minimum payments on your credit card balances.

Try as much as you can to make enough payments that will lower your credit balance.

Only making minimum payments will have you with high credit card balances that will keep you in debt.

  1. Signing up for debt relief programs, but not understanding how they work

If you are signing up for debt relief programs, you have to know what the stakes are when you use them.

Always do your research on these debt relief programs and listen to what other people have to say about these programs.

You do not want to get aid in paying off your debt and then get strapped in other high-interest rate debt that you have to pay off to the relief programs.

  1.  Not filing your taxes or paying them when they are due 

Always file your taxes when they are due.

If you do not file your taxes, you will be charged extra fees that are going to keep you in debt if you cannot find a way to pay them off.

A lot of people make this common mistake without knowing the implications of not filing their taxes.

If you can take advantage of tax benefits and tax deductions, you do that because it saves you a lot of debt with the government. 

  1. Lending money you cannot afford to lose.

When you are lending money to your friends or relatives, lawyers make sure it is what you can afford to part with.

Some people lend out the only money that they have to get them through the month, only to end up borrowing loans to survive.

You also have to think about when your debtors fail to pay you back your money.

What would you do?

This is a common mistake people make that keeps them in debt.

Always lend money that you cannot afford to lose if you want to avoid this.

FAQs Common Mistakes People Make That Keep Them in Debt

What are mistakes people make with money?

Excessive spending

Living on borrowed money

Living paycheck to paycheck

No retirement plan

No financial plan

What gets you in debt

Lack of awareness of how money works

Becoming a money worrier

Keeping up with the Kamaus. The Kamaus make you feel inadequate

No budget

What are some recommended steps for getting out of debt?

Have/set goals

Make a list of current debts

Plan your debt repayment

Can you go to jail for debt?


What’s the disadvantage of debt?

The biggest disadvantage of debt is the amount you borrow won’t be the same as the amount you payback.

Stress and depression are the other cons of debt

What makes a person creditworthy?

Creditworthiness means creditors trust you to repay their money.

What’s the easiest way to get out of debt?

Pay more

What’s your budget

What happens if you ignore debt collectors?

The debt collectors may file a lawsuit

Is it okay to be in debt?

NOt if you’re spending other people’s money living a luxurious lifestyle.

YES, if you’re spending the money to stay in business or if you borrow for business, then it’s fine to be in debt.

Read More on Common Mistakes People Make That Keep Them in Debt

How to Pay Off Debt Quickly and Easily in Kenya

Debt Myths in Kenya

I get it.

We all don’t want debt.

But, have you ever stopped to think that there are some common mistakes you make every day that are keeping you in debt?

If you are struggling to pay off your debts or you cannot get out of debt no matter how hard you try, chances are you are doing this whole thing wrong.

There are some mistakes that you cannot go back on when it comes to paying off your debts.

If you want to manage and pay off your debt effectively, you have to start by identifying the things that are holding you back.

What are these mistakes that are keeping you in debt?

How can you avoid them?

It is good to know how to manage our finances effectively if we want to keep off debt.

Are you in debt?

Have some of these mistakes made you realise what’s making you stay in debt?




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