Most debt is caused by fixed costs such as health care.

It was not, as Bach put it, “the daily extravagances that drain your resources” that were the cause of many of our money woes. In the view of researcher Jeff Lundy, who wrote a paper on the phenomenon, the spending, while a problem in that it caused a decrease in one’s financial reserves, wasn’t causing the financial ill winds themselves: “Spending $2 for a latte may, over the long-term, add up. But it is not the direct cause. It has to be in combination with high medical expenses or losing your job or something like that.” 

As Elizabeth Warren and her daughter, Amelia Tyagi, revealed in their book The Two-Income Trap, the problem was much more complicated than many personal finance gurus would have it. It wasn’t that an entire generation had suddenly decided to purchase lattes and other frivolities at the expense of their financial futures. In fact, the cost of everything from packaged food to furniture was significantly lower than it was in the 1970s.

Warren and Tyagi demonstrated that buying common luxury items wasn’t the issue for most Americans. The problem was the fixed costs, the things that are difficult to cut back on. Housing, health care, and education cost the average family 75 percent of their discretionary income in the 2000s. The comparable figure in 1973: 50 percent. Indeed, studies demonstrate that the quickest way to land in bankruptcy court was not by buying the latest Apple computer but through medical expenses, job loss, foreclosure, and divorce.

Giving up a latte or another such small extravagance in this environment wasn’t going to be enough. Yet the personal finance shills continued to tell people their problems were mostly of their own making.

More: http://www.slate.com/content/slate/articles/slate_plus/debt_academy_2016.html

HOW DID DEBT GET SO BAD IN THE UNITED STATES? AND WHAT CAN WE DO ABOUT IT?

What’s it like to empty out your 401(k) to help a family member? How does a first-generation college student navigate student loans at a for-profit school? What should a 64-year-old man with tens of thousands of dollars in medical bills do about retirement?

Slate has been following the stories of seven diverse people who have been affected by four kinds of debt: student loans, medical debt, credit card debt, and housing debt.

The United States of Debt takes an in-depth look at the reality of owing money in America: how we get into debt, and how we can get out.

It's a boldly reported series of conversations with leading experts and Americans all over the country, hosted by Slate’s personal finance columnist Helaine Olen, author of Pound Foolish: Exposing the Dark Side of the Personal Finance Industry.