When Credit Card Spending Gets You Stuck in a Debt Loop, Here’s How to Get Out of It

For those of us who struggle with debt, it can be mentally and emotionally difficult. Pair this without knowing the best steps to get out of it, and it can feel like a futile proposition. One of the first steps you can take is identifying your debt loop and where you tend to continue the cycle. This is an important part of moving past your debt.

Let’s start with what the “debt loop” is. I first heard this term from Canadian finance master Shannon Lee Simmons. It is a six-stage cycle that keeps us in debt. The stages are:

1. Financial tripwire
2. Debt happens
3. Unrealistic debt repayment plan
4. Failure
5. Shame and blame mentality
6. “Fuck it” moment

Let’s break it down! First up is your financial tripwire. A financial tripwire is an opportunity destined for overspending, and they happen to all of us throughout our lives. There are two types of financial tripwires: those you can control and those you can’t. The tripwires you can control are events like being too generous at a friend’s birthday or overspending at your favorite store’s holiday sale. The ones you can’t control are emergencies like your car breaking down and having to spend $5,000 to fix it, your house getting flooded, or getting in an accident and your health insurance not covering your costs. Either way, tripwires cost you money—often, money you don’t have. This kicks off the debt loop.

But it’s also important to remember that debt happens. Sometimes, going into debt is necessary, and sometimes it’s not. But it never feels good, because when you have debt, it means you have less money to spend until the debt is paid off. Also, debt often means you are paying more in the long run than the good or service is actually worth. Double bummer.

Take credit card debt, for example. At first, you have a minimum payment of $20 and it feels like no big deal. You’re right! But the danger in this way of thinking is that it makes it easier to keep going, and then, all of a sudden, your minimum payment is $500 and now you can’t pay your bills. As Simmons says, “If luck is what happens when preparation meets opportunity, then debt is what happens when lack of preparation meets a financial tripwire.”

Going forward, I’d like you to consider what your controllable financial tripwires are. Where do you tend to overspend? If you need some help, look through a few bank statements and highlight all the purchases that you can’t remember making or that bring up negative feelings. Then look for themes.

Next step is paying that debt off via an unrealistic debt repayment plan. I have seen so many people go wrong at this step, and it makes a lot of sense. Many of my clients want to get out of debt and move on with their lives. In an effort to do so, they try to reduce their spending money and throw as much money as they can at their debt. On the surface, that seems great. Look at that person working really hard to take care of themselves financially. If you are one of these people, I commend you. The problem here is a sneaky one and can lead to failure in two ways.

First, it’s important to understand that spending money represents your lifestyle. If you lower your spending money drastically to pay off debt (i.e., you try to live off ramen and PB&J for good), you run the risk of getting fed up with an unsustainable budget. Eventually, this leads to rebellion, you spend more money than you intended to, and you feel like a failure. It is possible to spend less for a few months, but not for years. You can’t push your entire life off until you are out of debt. It’s all about balance.

Second, if you don’t have an emergency fund, throwing all of your money toward your debt puts you at great risk of going back into debt and failing again. Say you are putting every penny toward paying down your debt, and then your car needs new tires. You don’t have $900 saved for tires, and you definitely don’t have room in your budget to come up with $900, so you have to go back into debt to pay for them. This isn’t the end of the world, but it can be damaging because it negatively affects your morale.

Being successful with money is 90% emotional. If you put all of your effort into a plan that doesn’t work out, you may give up and never try again. You want to avoid this at all costs. Make sure that whatever you do, it is sustainable. It may take longer to achieve than you want it to, but the emotional wellbeing you will have will be so worth it. Remember: If you’re in debt, it’s likely not because you are bad with money, a shopaholic, or out of control. It is because your plan is unrealistic. That’s especially important to keep in mind when faced with the shame and blame mentality and even your own “fuck it” moment.

Failure tends to lead to all kinds of negative emotions. In this hypothetical situation, you’ve been trying over the last three months to pay off your debt by restricting your diet and other expenses, when, suddenly, you leave your laptop in a cab. Now you find yourself without any savings because you have been using all your extra cash to pay down your debt (a staple of an unrealistic debt repayment plan) and you have to buy a new computer, putting you further into debt. This feels like a huge setback, a failure, and an omen that you will be in debt forever. You start to beat yourself up for not doing better. You tell yourself that this is all your fault, and you feel ashamed that you got into debt in the first place.

All this negative self-talk is what leads you to Step 6: the “fuck it” moment. If you feel like paying down your debt is a futile act, you won’t be motivated to continue. For many of us, paying off debt is a process that takes months or years. If we don’t believe we can find a way out, we say, “Fuck it! I’m already $10,000 in debt. What’s another five? Who says I don’t have the money to go on this vacation with my friends?”

You go into more debt, your minimum payments increase, and then someday you want to try to get out of debt again only this time you owe even more, and the cycle continues.

For me, the biggest takeaways to look out for from the debt loop are the unrealistic debt repayment plan and the shame and blame mentality. If you are interested in getting out of debt, you need to be realistic about the timeline. You need to allow yourself room to enjoy your life now. We all know that life can end in an instant, so it doesn’t make sense to wait to live until we are out of debt.

It is also paramount that we follow Simmons’ advice and reframe our debt. If you beat yourself up about your debt, it is only going to be harder to achieve your goal. We must be gentle with ourselves, and that starts with finding a new perspective on our debt. Say, “I did the best I could with the information I had,” instead of “I am such an idiot. Why was I so stupid?”

I know you can do this! You are capable, worthy, and loved.