Debt Is A Creature Of Habit

When you find yourself in significant debt, it can feel like it came out of nowhere.

However, nothing comes from nothing. Debt can creep up on you just as easily as it can be caused by huge, sudden expenses. What’s worse, is that a lot of debt is preventable, caused only by the habits and poor decisions.

Here, we’re going to look at some of the worst financial habits, and how they can get you in a situation that’s easy to fall into, but hard to escape.

Do You Budget?

Anyone who thinks seriously about their finances considers putting together a budget but, unfortunately, few people actually do it.

It take time and effort to calculate all your costs and put together a plan to reduce your spending and save a little extra. However, budgeting it’s critical- because it teaches you to scrutinize your expenses, think about how you spend, and fix past spending mistakes.

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As with all habits, if you actively pay attention to it, it’s a lot more likely to stick with you.

Are You on Autopilot?

If you don’t pay attention to a habit, you’ll never get control of it.

Automatic payments on bills can be extremely convenient. However, if you’re not in a great financial situation, you can be one forgotten automatic bill away from going past your overdraft limit, leading to more debt.

Paying your bills manually makes you a lot more mindful of them. Sure, it’s less convenient, but it might be a necessary step until you’re in a better financial situation.

 

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Timing of Bill Payments

Some people might be hesitant to take their bills off automatic payments because they are concerned they will forget to pay them completely. That’s a justified fear. Forget your bills and you start building fees.

If it gets particularly bad and you miss the correspondence from the service provider, the arrears and collection processes can get started without you being fully away.

However, there are apps like prismmoney.com that can help keep you on the right path, reminding you of upcoming bills on a regular basis. You may, instead, consider having all your bills come out on the same day, so you have a lot less to remember and one simple date to manage.

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On Impulse

One of the biggest issues with impulse spending is that so many of the people prone to it don’t even realize they are doing it.

It doesn’t necessarily mean spending large amounts of cash on frivolous things. You can spend a little at a time, and the purchases can be perfectly reasonable and justifiable.

The impulse, however, must be controlled.

Avoid impulse spending by checking out developgoodhabits.com. For instance, avoid going to  retail areas unless you have a specific purpose. Keep a shopping list on you and make sure you don’t forget anything that might have you going back to the store later.

For items that cost over a hundred dollars, give yourself a week deadline to think about it. That will give you time to decide if it’s something you truly need- or want enough to justify the cost.

Credit Card Use?

Impulse spending and credit cards often go hand in hand, unfortunately. Your credit cards can be useful, mostly for building your credit, so you can later acquire loans.

However, many people misuse and overuse debt. It should not be used for regular expenses in place of funds already in your bank, for instance. Nor should it be used if you’re unable to pay more than the minimum requirement repayments.

If your credit card usage is starting generating more debt, consider visiting debtconsolidationloans.com for the programs that can help you tackle it early.

Credit card debt may become a snowball that’s hard to push back up the hill, so keep your use of credit under control.

Keeping It to Yourself

If you’re struggling financially, get in touch with your creditors, in order to explain your financial situation, and to get caught up with your payments.

Many people, unfortunately, are scared to get in touch with their creditors. The truth is that most creditors are open to negotiation and willing to cut you some slack. It costs them money to collect what is owed, after all, so they may accept new payment terms to avoid the expense of the collection process.

What About Emergencies?

 

The first habit you should tackle is the lack of budgeting. A budget doesn’t only help you control your expenses, it also helps you save money.

Figure out how much you can put towards your savings goals with every paycheck. As soon as that paycheck comes around, take that money out. A portion of it should immediately be going to an emergency fund that can cover unexpected costs like car repairs or HVAC fixes.

It’s easy to find yourself with nothing left to save at the end of the month, cut your expenses and start saving now.

You Got This

It’s much easier to prevent debt than to climb back out of it, so while that’s an option, do what you can to prevent taking on debt. However, if you do need to make your way out, you still have to cut the habits mentioned above from your life. As long as you’re indulging in them, you won’t ever be free from the risk of debt.

 

Ken Boyd

Author: Cost Accounting for Dummies, Accounting All-In-One for Dummies, The CPA Exam for Dummies and 1,001 Accounting Questions for Dummies

Co-Founder: accountinged.com

(email) ken@stltest.net

(website and blog) https://www.accountingaccidentally.com/

(you tube channel) kenboydstl

 

Image: Bullseye, Jeff Turner CC by 2.0