When it comes to handling our finances, we all make mistakes from time to time. If you’re looking to get out of debt, there are certain financial habits you must break in order to be successful. Check out this article to find out more.
Everyone has bad financial habits. Whether we have a shoe addiction or eat out way too often, those dollars we spend “every now and then” quickly add up. Treating yourself from time to time isn’t the end of the world, especially if your budget allows you to. But when you’re looking to get out of debt, you have to become aware of the fact that every single penny counts.
Temptation to spend money is everywhere. Your inbox may be filled with news of sales and special offers that sound too good to pass up. When your coworkers decide to go out for lunch, it’s hard to stay back instead of tagging along. Stopping yourself from buying a delicious treat whenever you pass a certain pastry shop also isn’t easy. However, making an effort to break your bad financial habits in order to become debt-free is definitely worthwhile. You’ll significantly reduce the amount of financial stress in your life and you’ll have more options when it comes to investing your money in the future.
As of 2014, the average U.S. household credit card debt stands at $15,191. If you’re looking to reduce your debt, here are five bad habits you should break as soon as possible.
Not knowing how much you owe
Ignoring your debt won’t make it go away. There are many people out there who only make the minimum payments on their credit cards and don’t even bother to find out exactly how much they owe. Don’t make that mistake. In order to take charge of your finances and formulate a debt repayment plan, you must sit down and calculate the total amount of money you owe. Talk to your creditors, look through your bills, and pull the free annual copies of each of your credit reports. Once you have the total figured out, work out a payment plan.
The truth is that, more often than not, debt is emotional rather than mathematical. If you’re in debt, reading some personal-finance articles and hoping for the best isn’t enough. You’re likely anxious and worried that you won’t be able to pay off that total amount, so you prefer to live in ignorance. The best thing you can do? Talk to your family and friends about your money issues and ask for their support. When you know that someone is rooting for you to repay that pesky debt, it will be easier to find the motivation needed to succeed.
We often sabotage ourselves financially by making impulse purchases we never planned for. When something is on sale, we buy it thinking it’s a great deal, even when we don’t necessarily need it. On that same note, we tend to go shopping when we’re upset, hoping it will make us feel better. Impulse buying can cause you to lose track of your budget and can often lead to poor purchasing decisions and more debt.
While an impulse purchase once in a blue moon may not leave a lasting impression on your finances, making it a habit can seriously affect your ability to reach your long-term financial goals. Always take a list with you when you go shopping and stick to it. Avoid sales. Don’t let this bad habit derail you from your path to becoming debt-free. You can find more tips on how to keep impulse buying under control here.
Living way beyond your means is another surefire way to accumulate more debt. Guilty of spending chaotically and not keeping track of where your money is going? It’s time to fix that. And the good news? There are several online tools that can help.
Once you’ve figured out a debt repayment plan, you need to come up with a realistic budget based on your income and living expenses. That might mean that you’ll have to reduce your monthly expenses or give up certain luxuries. Sticking to your budget, however, will bring you one step closer to reducing your debt.
Keeping up with your friends
Competition between you and your friends can easily lead to poor spending choices. When they book a fancy vacation or buy a new gadget, you might be tempted to do the same in order to keep up.
Nonetheless, it’s important to remember that they are the only ones who truly know what’s going on with their finances. When a friend pulls up to your home in a shiny new car, you don’t know what they had to sacrifice in order to afford it. Maybe while you’re struggling to become debt-free, they’re not interested in how high their credit card balance gets. Everybody has their own financial goals and priorities, so you should stop comparing your way of spending money to your friends’.
Taking on even more debt
Although this one should be obvious, it’s still worth mentioning, especially since we live in a world where you can now easily apply for a loan online. Trying to cover your current monthly payments by taking on even more debt can only lead to disaster. On the same note, making big investments like buying a new car or home while you still owe an impressive amount of money will only end badly. Figure out a way to eliminate your current debt before moving forward with your plans to secure any new loans.
The first step to breaking a bad habit is to recognize that your behavior needs to change. Once you realize how your irresponsible spending is affecting your finances, you’ll have a better chance to correct it. Getting out of debt is a goal worth pursuing, so don’t give upon it. Remember that you are the only obstacle standing between you and your financial freedom.
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