re: People who can't manage finances or spending. How does this happen?

Lifestyle creep that's always one step ahead of their income.

Early in one's career, pay raises generally come relatively often. It's easy to fall into the trap of saying that you're slightly overspending now, but once you get your next raise, you're golden. Then you get that raise, and your lifestyle creeps to the next step, and the next. You never actually let your pay make it past your spending.

Then one day, the raises stop coming quite so frequently, but now you have years of creep piled on top of one another, and no more substantial pay increases coming down the pike.

Then you're fricked.