Getting rid of debt and habits that
lead to debt.
Nobody likes
to go into debt, true? Unfortunately, however, keeping those prominently red
marks out of your account books is often easier said than done. And if we are
honest with ourselves, we will agree that debt is not something that happens
overnight, out of nowhere or just coincidentally. It comes about as a buildup
of certain spending habits. Some habits that we indulge in daily; you know,
buying a latte every morning, a new pair of shoes every so often, might seem
harmless at first but have an adverse effect on your finances in the long run.
Recognizing
and identifying these habits early could not only save you a lot of cash but
also stress in your later year. Often when people find themselves in over their
heads in debt, they regret their past actions and wish they could turn back
time and make a few adjustments to their prior habits. However, lamenting over
past mistakes is as good as crying over spilled milk, don’t you agree? Why not
start identifying bad habits now and start stopping them in their tracks? Take
a look at some of these bad habits that could easily lead to debt and how you
could possibly avoid them.
1.
Spending more than you make.
It is
impossible for you to spend $800 per month while your paycheck is just $500,
right? Wrong! The habit of spending more money than you earn is easier than you
think. And the worst part is, you may be doing this without realizing it. This
could be through borrowing from other people, dipping into your savings or
using a credit card.
You can get
away with this for a short amount of time, but sooner or later these terrible
spending habits will catch up with you. You may end up maxing out of your
credit cards, depleting your savings or run out of creditors to borrow from.
Remedying
this is simple! Keep your spending within your income in order to leave within
your means, and rid yourself of debt.
2.
Managing money without a budget.
Budgeting,
just like dieting, is one of those terms that make some people cringe just at
the sound of it. However, creating a budget and working with one is one of the
best ways to keep oneself debt free. With a budget, you are in a position to
know exactly how much money you will be spending in a particular period and
where the spending is going. So be it the newly released phone you have been
eyeing, or the kitchen plates set you have been planning to buy, allocate them
in a budget. Through this, you will be sure to avoid using credit cards on
impulse and building up your debt.
3.
Use of credit cards for daily expenses.
Relying on
credit cards to buy groceries or gas, among other daily expenses, ends up being
more costly since you pay more for such expenditures that you should. Very many
people usually run up their credit cards and then pay only the minimum balance
monthly. This is a highly detrimental habit that needs to be avoided if you
ever want to get ahead financially.
4.
Using credit when you have cash.
Quick
question; how many time in the past have you charged goods or services to your
credit card while you had the money to pay for it? Why use credit if you have
enough money? You might want to acquire
the goods you need without having to pay for them immediately, but this convenience
of not using the money you have at hand (in your wallet) eventually comes at a
cost. Let’s face it if you are not willing to pay for it right now; chances
are, you are likely not going to be willing to do so tomorrow. On top of that,
it is going to cost you more.
5.
Paying off debt using debt.
When you use
a credit card or worse even, take a loan to pay off another debt, you are
simply wasting time. This is because you are merely shifting and shuffling your
debt around. But remember, there are transaction fees involved and loan origination
fees. This simply put, implies that you are only buying time and increasing
your debt.
To break
this impossibly bad habit, aim to reduce your spending to ensure you have
enough money to repay all your debts monthly.
6.
Ignoring your credit score.
A credit
score is important because it determines how much money you can borrow, who you
can borrow this money from, what kind of house you can purchase, the kind of
car you can drive. In some cases even, the kind of job you can get. It is
therefore highly essential that you keep track of your score and monitor it in
the event of changes.
7.
Disguising wants as needs.
It is very
easy to convince yourself that you need to buy that pair of shoes or that you
need to go on that trip. Do you really, though? The bitter truth is that half
of the ‘needs’ you think you have, are more or wants. Evaluate yourself and see
whether you can live without them. Correct, you need food, shelter;
transportation, necessary clothing, but you ‘want’ a better car, a bigger car and
so on. If you cannot afford it on cash, then hold on purchasing, and keep
saving until you can.
8.
Paying bills in no particular order.
Although
paying bills in no order may not matter if you intend to pay for all of the
balances, it will matter if you fall short for one period say, one month. For
instance, if you decide to pay for all your credit card balances first and then
realize you cannot manage to make the minimum payment on monthly rent or
mortgage payment. By this, you put yourself at risk of having no roof over your
head. You may find yourself taking further loans to cater for such costs, and
hence falling deeper into debt. To avoid such dilemmas, prioritize your bill in
order of importance and start making the payments accordingly.
