4 Poor Money Habits That Trap You in Debt
Getting into debt is easy -- and the numbers are hard to ignore. Reports from the Federal Reserve Bank of New York as of the end of 2025 suggested total consumer debt in America was at a record $18.8 trillion, which breaks down to around $105,056 per U.S. household.
There are, of course, plenty of ways people fall into debt, but the hard part is typically getting out, especially if you don't recognize how you continue to rack it up. Here are four very common reasons Americans fall into debt, and suggestions on how to break these poor habits or risk being underwater for the rest of your life.
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1. Only Making Minimum Payments
It's hard to eliminate debt if you're only paying the minimum you owe. In addition, it can become unmanageable if your balance continues to grow while you're paying the minimum amount required.
Solution: Simply increasing the amount you pay can make a big difference. For example, you can cut the payoff time and interest in half by boosting your monthly payment to 5% of your balance.
2. Not Tracking Your Finances
"If you aren't paying attention to where your money is going, it's easy to overspend in certain areas and then not have enough for those unexpected expenses or your regular bills, which puts you in debt and keeps you there," said Andrea Woroch, consumer and money-saving expert.
Solution: "Stay on top of your finances by checking your accounts daily," Woroch said. It's easy to do this from your phone by using your bank and credit card apps, or you can use a tracking app, which links all your financial accounts in one place.
"When you see how much you're spending in one area, it's easier to cut back," Woroch said. "Remember, you can't change what you can't see, so it's important to actually look at your money regularly to make sure your spending aligns with your budget and goals."
3. Not Embracing the Difference Between 'Wants' and 'Needs'
Sometimes there can be a fine line between "wants" and "needs." Let's say your TV breaks and you need a new one. You head to the store and see a brand new 65-inch TV and decide that's the one that you "need."
"Sure it'd be nice to have in your living room, but do you need a $2,000 item for entertainment? Especially if you are going into debt for it and it's going to cost $3,000 with interest by the time it's paid off?" said Brandon Neth, Credit Card and Travel Awards Expert at FinanceBuzz.
"When you're at Best Buy, you may be able to tell the difference between a 55 and a 65-inch screen mounted right next to one another, but once you're home, you'll likely realize you'd be fine with a smaller TV," he continued.
Solution: Set a budget for yourself before you walk into a store, and consider buying items that aren't name-brand.
"As a former Magnolia/Best Buy employee, here's a friendly piece of advice: Many of the non-brand-name TVs use the same panels and technology as the big brand TVs," Neth said. "Often they're just calibrated differently out of the box. They can be adjusted to create almost the exact same picture in many cases. Save the money, invest it and build wealth -- not debt."
4. Focusing on Short Term Rather Than Long Term
"People don't think long-term," Neth said. "They are too focused on the now and looking for instant gratification."
He gives the example of regularly charging coffee to your credit card -- even if it only costs $5.
"If you're doing that twice a week, that $10 adds up quickly," Neth said. "Even worse, if you're putting this on a credit card that you're not paying off in full each month, paying interest on your two cups of coffee may raise the cost to over $20. Although it's convenient and tastes good, remember how much further your money can go."
Solution: A change in your spending mindset can help you break this debt-causing behavior.
"The one thing we don't get more of in life is time, so look at your expenses as time," Neth said. "How much are you actually making an hour once you deduct taxes, expenses and other related costs? A $15-an-hour job is probably closer to $9. Stop and think, is two cups of coffee worth an hour of my time?"
This is an especially important mental exercise for larger purchases.
"How many extra years must you work to pay off that car or TV? These numbers just get higher as you account for accruing interest," Neth continued. "Don't stall your financial future by making impulse decisions today. Set goals for the future and remind yourself of them daily. It takes hard work to get out of debt and stay out of it, but when you do, you take back control of your life."
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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