Getting Out of Debt: The Biggest Challenge is Managing Your Behavior
Of all the reasons why we all end up in debt, our behavior is probably the only thing we can easily control. Understanding behavior that drives you into debts is the first step towards avoiding the burdensome trap of debts.
For most people, nurturing a healthy relationship with their credit cards is the first step towards dealing with behaviors that get them into trouble.
What I discussed in this post are behaviors that will get you into debts and how to manage them.
Failing to think about your future
Impatience is the primary factor that results in a high debt-to-income ratio. This can lead to paying substantial interests on purchases. It goes without saying that the more impatient you become, the more you will pay for everything. Why buy a newly launched phone for $800 while you can buy it a few months later for almost 30% off of the original price?
Cash management, sticking to a budget, spending wisely, and spending less than your total income will help to avoid impulsive buying. Planning far into your future leads to better management of your finances.
To deal with this behavior, ask yourself what you want your money to do for you in the future. The secret is to be as specific as possible. Think about the trips you want to take or a house you want to buy.
Bargain hunting for fun
You might think you are saving by buying items at a fraction of the retail price especially when the discount is designed to entice you. Unfortunately, if the purchase was not planned for, you are not saving at all.
In fact, bargain hunting is likely to drive you to spend more than you had budgeted. It is unfortunate how most people easily become addicted to the thrill of bargain hunting thinking that they are saving when in reality they are watering down their savings plan.
This behavior can be fixed by shopping only when you are in need of something specific. In fact, never buy anything that is not on your shopping list. Consider unsubscribing from the retailer emails, deal deals, and anything designed to trick you into spontaneous buying.
Admittedly, this requires a great deal of willpower to overcome.
Carrying all your credit cards
Credit cards are the main reason why most people get into trouble with debts. On the other hand, this is the most avoidable reason that could land you in serious financial turmoil. Filling your pockets with credit cards does not mean you will spend more. However, it makes it harder to keep track of your budget.
The only man who sticks closer to you in adversity than a friend is a creditor.
Avoid having more than three credit cards with you. You can have one for the store, gas, and a specialty card. If must more credit cards, just leave them at home and stop using them. Be sure to pay off the balance before stacking thing in a drawer: that is if canceling them all is not an option.
Making minimum payment on your credit cards
This is equally another avoidable behavior that pushes people into debts. Making only minimum payments will result in paying a maximum amount of interest to your bank. The minimum payment is applied to the interest charge with just a small amount going towards reducing the principal amount owed.
Make a habit of paying as much as you can, even if it means one card at a time. Once you settle the first card, focus your attention to the next until all cards are fully paid off.
Craving Instant Gratification
With the age of swiping and mobile payment now upon us, spending money is now much easier. These technologies can be as harmful as they are beneficial. Since these technologies are designed to eliminate the gap between when one decided to make a purchase and when to make payment, chances are you will end up spending more than you had budgeted.
If only you could take 5 minutes before completing the purchases, chances are you could save money. Even with instant payment technology now upon us, always take a few minutes or hours to think about the purchase you intend to make.
You can leave the items in the cart or on your mind for a few minutes and think about the purchase before making the payment.
Avoid memorizing your card number or allowing your browser to save them.
Once you decide to make a purchase, think about the pain of losing and the joy of gaining. You can convert the cost into the time it takes you to earn the cash you are about to spend.
Spending your savings and future earnings
Most people will easily fall into spending more than they have with others spending what they expect in the future. For example, you see a gadget that you certainly cannot afford, but you know you have an overtime check due in the near future. Just like that, you decide to buy using a credit card. Since the cash you are expecting will be in before the credit card bill, you spend it on something else instead of paying off the card.
Unfortunately, when the bills arrive, you have nothing to pay it off getting yourself into more debt.
Ignoring your credit report and credit score
Failing to keep an eye on your credit report every year could amount to blindly entrusting your financial future to your creditors. This can be compared to assuming that they could not make errors on your debts and bills. Keep in mind that errors are quite common on consumer credit reports. For you to avoid such errors, you must check your credit history and dispute any errors that you come across.
Failing to budget
Budgeting is the ultimate way to avoid getting into debts. Failing to create and sticking to a budget will lead to more financial problems including debts. This can be compared to taking a trip without a map or without a destination. Without a plan, you are guaranteed to get nowhere in your financial life.
Setting a budget gives you a map to follow making it easy to know when you are getting off track. Your budget is your guide on your path to a strong financial future.
Another habit that rarely works the way people want is playing the balance transfer games. For example, you have a zero-interest card and you transfer the high rate credit card to the new one. This problem now leaves you with two cards to use and it is unlikely that the balances will get paid by the time the zero interest cards gets to normal rates.
Once this happens, you might feel tempted to get another zero-interest card and the chain starts all over but now, you have two balances to transfer. It is true that you have the right to use your credits cards and store cards as you choose. However, shedding this behavior means choosing a responsible life with credit. If you think of this as a getting out of debt strategy. You are wrong!
Debts suck! We all know how it feels to be in debt. With well over 80 percent of Americans in debt, it becomes impossible to even consider saving or investing your income. This is because debts are the primary roadblock that keeps us from attaining financial freedom ultimately hindering us from being able to enjoy ourselves and the money we have.
This explains why it is paramount to learn how to get out of debts if you are to focus your energy on investing rather than worrying about the next payment. Debts are such a common problem that most people do not even think twice about what we owe or how we got ourselves in such problems.
Simply put, debts are as a result of spending more than your income.
Unfortunately, it is not that simple in real life. Unavoidable events, poor planning, and decisions such as pursuing further studies can leave one dealing with huge debts that usually take years to pay off. Getting out of debt is about understanding the main caused of debts. It will help you make better decisions and avoid more debts. Keeping the above behaviors in check will ensure that you do not find yourself dealing with more debts that you can accommodate.