Why so Many People Can’t Keep up With Their Monthly Debt Payments

High interest rates mean that debt can grow quickly.

Forget about paying all your debt off at once — for some people, it’s hard enough to pay in pieces. A survey from Achieve.com and Money.com found that 34% of Americans cannot afford their full monthly debt payments, and nearly a third of respondents reported that their unsecured debt had increased in the previous 12 months.

Below, find four reasons so many Americans can’t keep up with their monthly debt payments.

1. Rising costs force consumers to rely on credit

For many households, debt is the result of rising living costs, unexpected expenses, or income disruptions that leave little room in the budget.

“Most people aren’t bad with money,” says Alvin Carlos, CFP and financial advisor at District Capital Management, “it’s just that things happen.”

That may be a medical emergency you put on a credit card or a personal loan to cover an expense you didn’t see coming. Maybe the payments feel impossible due to job loss, underemployment, or other circumstances beyond your control.

The Achieve.com survey also found that 53% of Americans carry credit card balances to cover essential living expenses, including necessities such as groceries, utilities, and other household bills.

“When credit cards become a tool for paying for necessities rather than occasional purchases, balances can grow quickly,” says Austin Kilgore, analyst at the Achieve Center for Consumer Insights. “Many consumers are doing their best to manage their finances, but rising costs for everyday essentials can make it difficult to keep up with monthly debt payments.”

Even consumers who are budgeting carefully can find themselves relying on credit when essential expenses consistently outpace income. In a high-interest-rate environment, carrying those balances can make it increasingly difficult to make progress and stay current on monthly payments.

2. Keeping up with the Joneses

Some people who expect to have the money to pay their debts find that the cash somehow never materializes.

Keeping up appearances can be a problem for high earners, especially those who earned a good living before eventually being laid off. “A lot of things influence our decisions,” Carlos says. “It could be our situation, it could be our friends, Instagram, TikTok — you see what other people are doing.”

This might look like keeping a car with high monthly payments, paying rent that’s just a little too high, or eating at restaurants more often than you can afford. Cutting back is harder than it sounds.

Carlos tells Business Insider that his clients can be wary of making budget cuts. “It’s status, preconceived notions, expectations that they put upon themselves because that’s what they think society will respect or appreciate,” he continues.

3. Succumbing to lifestyle creep

When you make a good living, it’s common to give in to “lifestyle creep” by spending more money as your income increases. Carlos gives the example of someone who gets a promotion and decides to use the pay bump to move from a one-bedroom place to a two-bedroom home. It seems perfectly reasonable, but it means a significant increase in fixed costs.

“I have another client who wanted to move to a bigger house because they’re having a third child, and I told them, ‘Well, great, you can sell your house and use the equity to buy a bigger house,’ but they wanted to keep it as a rental. Now they’ll have two mortgages because it’s ingrained in her that rental property is always good.”

This isn’t necessarily a problem — but if you lose any source of income, it’s suddenly difficult to maintain your new lifestyle.

It’s a vicious cycle. In a worst-case scenario, you take on debt to keep up with your new way of living, but then you don’t have enough money to afford the monthly payments on that debt, either.

4. Fear of talking about money

A lot of people are afraid to have in-depth talks about money, budgeting, and financial planning. That’s not surprising when you consider that half of respondents to the Achieve.com survey feel anxious about their debt, and more than 40% feel hopeless and overwhelmed.

Financial trauma, guilt, and fear of conflict with their partners can keep people from having the “how to get out of debt” talks. Addressing the issue and setting up a realistic payment plan can be the scariest — but most necessary — part of getting out of debt.

“The psychology of debt is brutal, but there are ways out of it,” Carlos says.

Getting out of debt is possible

More than half of respondents to the Achieve.com survey say their finances need a strategic reset, and 82% feel confident their situation will improve.

“Before we even go to the technicalities of how to pay off debt, we typically start with having clients reflect on what’s really important to you in your life,” Carlos says. “Is it important to you to have a nice house or to travel? One of our clients, they just want to go to a theater each month and they don’t care about anything else.”

Once you zero in on the one or two things that are most important to you, you can keep them in the budget — and cut everything else you don’t need. “Basically,” he continues, “you’re trying to free up money to pay off your debt without really affecting what’s important to you.”

Then, he finds one of the most effective ways to start tackling debt is to develop a routine. “For example, it could be a routine to check your budgeting app,” he says. “There are a lot of budgeting apps out there, but it won’t do you any good if you’re only checking once a month.”

Maybe check daily while you’re eating lunch, or after you walk the dog on Saturday mornings. It won’t immediately change your spending habits, Carlos says, but you’re raising awareness of where your money goes and whether it was worth it.

If you need additional help, you may want to look into a debt relief plan. Debt relief companies negotiate with creditors to resolve eligible unsecured debts, such as credit cards, personal loans, and medical bills, for less than the full amount owed. Debt relief is generally intended for consumers experiencing financial hardship who are unable to realistically repay their unsecured debts under the original terms. It’s not a fit for every borrower, but if you’re truly feeling buried under your debt and considering alternatives like filing for bankruptcy, it could be an option for you.

“The important thing is you come up with a plan and a system so you can execute it,” Carlos says, “because there is a way forward.”