Going into debt is not a coincidence or an accident. There are particular spending habits that result in debt. Recognizing these habits now could save yourself a good deal of money and anxiety later. If you would like to stop making more money and pay back the debt you’ve got, you have to eliminate these undesirable habits.
1. You Spend More Than You Actually Make
You know that it is impossible to spend $2000 monthly when your paycheck is only $1500. It is only logical. However, you dip into savings, borrow from other people and use your credit cards just so that you can spend that extra money that you really don’t have.
Inevitably, you are going to deplete your savings, max out your credit cards, and try to borrow more cash. Keep your spending at a minimum and think of your monthly income when it doubt. Stay within your means rather than generating more debt. Reduce your spending below your earnings and use the additional cash to pay off your debt.
2. Stop Spending Money You Don’t Have
Spending more money than you earn is enabled by spending money you do not have or money you’re yet to make. You spend money you don’t have by using credit cards and carrying out loans – payday loans, cash advances, overdrawing your account, etc.. If you use these approaches to pay bills and make purchases, then you are creating debt. If you don’t fully repay the debt every month, it will continue to grow and grow and grow until it is out of your control.
You can obviously stop this horrible habit by not spending more money than you make – by decreasing your expenses and relying only on your earnings to pay for your own wants and needs.
3. You Use Your CC For EVERYTHING!
You should use cash (or available money in your checking account) to make everyday purchases like groceries, gas, clothes, and entertainment. The appeal of credit cards is the capacity to cover later for things that you buy now. The caveat is that you are not as inclined to pay your credit card invoice for items that you’ve already consumed, which many “ordinary” buys are. Utilizing credit instead of cash is a bad habit, especially once you don’t pay your credit card bills in full each month.
If you decide to make the most of your reward earnings by charging more, only charge what you would have bought with money and pay back the purchase straight away.
4. Using Credit Instead Of Cash
Another bad habit that leads to debt is choosing credit over cash – even though you actually have the money in your bank account. You may want to get the goods (or services) without having to pay for them, but the ease of holding on to this money in your pocket comes in a cost. Chances are, if you don’t want to cover it today, you’re not likely to need to pay for it tomorrow.
The solution is to use the cash you have instead of your credit card. Think of it this way: if you use your CC you’ll wind up paying more than if you had just spent your own cash.
5. Develop More Debt To Pay Off Your Existing Debt
If you use credit cards to repay other loans and cards to repay other loans…Newsflash– you are not paying anything off. You are only shuffling your debt around and incurring more debt every time you do so. Balance transfers have transaction fees and many loans have some kind of deposit or origination charge. So once you use debt to repay debt, you end up worse off than when you started.
Using debt to “pay off” debt might be beneficial if you can transfer a balance from a high rate of interest credit card to one with a lower limitation. However, you need to be careful that the equilibrium transfer fee doesn’t negate the interest economies and that your post-promotional interest rate isn’t worse than your previous rate. Transferring a balance once or twice to make the most of a great rate differs from continually transferring balances to dodge charge card payments.