3 Expenses that Lead to Unmanageable Debt

Surviving My Finances Poster1.  Home Purchases

Nearly every family in America dreams of owning their own home. But many times they try to buy a home too soon after marriage or pay too much for a first home and end up in financial trouble. Unfortunately, quite often these families don’t realize that owning the home created their financial problems, because it took too large a portion of their spendable income. Because of this, inadvisable home purchases are the number one expense that leads to unmanageable debt.

The percentage of an average family’s budget that should be spent on a house payment is no more than 25 percent of Net Spendable Income (after tithes and taxes), according to financial author, Larry Burkett. Add to the mortgage payment the cost of insurance, utilities, maintenance, repairs, and telephone, and the percentage climbs to about 40 percent. Unfortunately, many couples commit to as much as 60 percent or more of their budget to housing. As such, there is no way that the family can handle that cost. If a family can afford to purchase a home within their budget that makes sense. But to destroy the budget just to get into a home is not logical.

2. Car Purchases
The second most common purchase that leads to debt is the purchase of a new car. Quite often couples who cannot qualify to buy a home buy a new car as a compromise. This is a major debt trap for couples, especially those who have a tendency to overspend, because they are generally not concerned with the overall price of the car—just the amount of the monthly payments.

A new car debt is actually harder to deal with than overspending on a home. In most areas of the country, homes can be resold at or above their original purchase price, because the market for used housing is consistently stronger than for new housing. But a family seeking to sell an almost new car to relieve debt is shocked to discover how little the car is worth on the open market. Most families owe more on a car that is one year old than its actual value. For families who can afford to do it, saving in order to purchase a good used car is a wiser decision than financing or purchasing a new car.

3. Emergencies
In order to plan a financial disaster, all a family has to do is fail to plan for predictable expenses that haven’t come due yet, such as automobile maintenance, emergency home repairs, or personal injury. Failure to plan for these is a major reason many families end up in unmanageable debt, because when the expenses occur they must be paid, so the only alternative available is often a credit card.

Why do people fail to anticipate these expenses that are inevitable? Generally because when they try to work them into their budget they don’t fit. So they simply ignore them until a crisis occurs. To do otherwise would require adjustments in the other areas of spending, such as housing, automobile expense, or recreation. Therefore, credit card debt invariably grows in order to absorb these non-budgeted, but predictable, expenses.


Without some kind of written financial plan (a budget) families will not realize that they have a financial problem until it overwhelms them. A budget balances income and expenses and reports on the status of income and expenses every month to avoid errors and expenses that led to unmanageable debt.   To download a free budget, click here.

  1. Larry Burkett, Debt-Free Living, Moody, 1989, pp. 97-102
  2. Larry Burkett, Debt-Free Living, Moody, 1989, pp. 141-149
  3. Larry Burkett, Biblical Principles Under Scrutiny, “ Avoiding Get-Rich-Quick,” Christian Financial Concepts, 1985
  4. Larry Burkett, Money Before Marriage, Moody, 1996, pp. 27-28
  5. Larry Burkett, The Complete Financial Guide for Young Couples, Victor, 1994, pp. 71-73
  6. Larry Burkett, The Complete Guide to Managing Your Money, Inspirational, 1996, pp.492-493
Special thanks to Nelson Searcy Coaching for helping me to develop this resource. You may check his web site at www.churchleaderinsight.com


About dkoop

Lead Pastor of Upwards Church: Leander & Jarrell, TX
This entry was posted in Surviving My Finances. Bookmark the permalink.

2 Responses to 3 Expenses that Lead to Unmanageable Debt

  1. Romie Salinas says:

    Thank You Pastor for Offering these Classes We Greatly Appreciate what you are doing for the Church Members in helping Us. Adam was such a Great Speaker and So Smart.
    Thank You for Lunch . Albert and I Appreciate You and Your Church Members.

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