While debt can occur very suddenly for some people, for others, it sneaks up on them over some time. Often, this is down to the bad financial habits that they show daily. This article will take a closer look at some of these habits. Perhaps you may end up identifying them in yourself and be able to do something to tackle them head-on. Otherwise, they could result in you getting into financial difficulty in the future.
First, on the list, we have impulse buying. Unfortunately, this can be a difficult one to tackle as we live in a society that is continually bombarded by advertising and marketing. Often, taking a step back to question whether or not you are making a sound financial decision can end up preventing the impulse purchase. Wait for a day or two before making a purchase that you weren’t planning on. You may find that the desire has disappeared entirely in this time. If you are going to buy anything suddenly, do not use a credit card to do it as this can give the illusion that you have more money than you think.
Getting Too Many Credit Cards
While credit cards can be useful in certain situations, when you take out too many of them, this can lead to a juggling act that is impossible to keep on top of. So, it would help if you questioned whether you need another one the next time you get a ‘special offer’. Different credit cards offer different spending limits and restrictions. When you have a lot of them, it can be very difficult to remember which rules you have to follow, and you are more likely to be hit by high repayment fees and interest charges. A good rule of thumb is not to spend more than you make and save up for major purchases rather than deferring them to somewhere down the line.
Trying to Keep Up with Your Neighbors
Otherwise known as ‘keeping up with the Joneses’, this is a dangerous financial precedent to set yourself as it can easily lead you into the trap of spending more money than you are making. When the people around you seem to have more than you in terms of material possessions, it can end up being very alluring to attempt to match their spending. However, you do not know about the exact nature of their financial situation. Plus, there is no guarantee that buying any of these things is making them happy. Success should be measured internally rather than externally. While there is nothing wrong with treating yourself from time to time, you do not want to do this if it means that you are going to plunge yourself into debt as a result.
Too Much of a Lifestyle Inflation
As many people move through life, they expect their lifestyle to inflate as well. While getting a pay rise is great, if you start spending more money than you are earning, you are going to be in a worse financial situation overall. If you begin going into debt to sustain your new life, it is time to reconsider your financial situation. A better habit is to safe the extra money that you are making as a result of your raise at work. This way, you are providing yourself with a financial safety net that you can rely on in the event that anything goes wrong along the way.
Ignoring Your Debt
While it can be scary to admit that you are in debt, if you do not take steps to manage it, the problem is only going to keep getting worse further down the line. Of course, some people can manage their debt all by themselves, whereas others need help in areas such as the ability to fight an unfair debt lawsuit. No matter what camp you fall into, you should certainly avoid burying your head in the sand and assuming that the problem is going to get better on its own. If you tend to rip up or delete bills before you open them, you become defensive or angry discussing debt, or you don’t have any idea of how much you owe, these are all potential red flags which you shouldn’t ignore.
Shopping to Be Happy
Many people spend in an attempt to lift the black cloud hanging over their heads. It is worth noting that shopping can release endorphins, but this doesn’t mean that it is a lasting route to happiness. When you are feeling in a bad mood, it is better than you avoid triggering activities like shopping, as this can create a vicious circle effect in which you shop away your problems. Instead, it would help if you did the harder work to identify what is going on in your mind. Of course, many people cannot manage this all by themselves and need to enlist the support of professionals.
Waiting for a Money Miracle
It is certainly the case that many people sit around with the mindset that a financial miracle is going to clear all their debt. Who has not fantasized about the positive impact that a lottery win would have on their lives? However, this is a circumstance that occurs on extremely rare occasions. If this fantasy starts overtaking your life, it can prove to be a problem, simply down to the fact that you are avoiding taking any real and practical steps to alleviate your debt problems. You are taking the control out of your hands and expecting a twist of fate to save you. While it is human to wonder ‘what if’ from time to time, you should not let this become your dominant way of thinking.
Not Learning About Finances
Bad habits can be the things that you are not doing as well as the things that you are. So, if you aren’t taking the opportunity to learn about finances, you could be putting yourself in a difficult situation as you aren’t equipping yourself with the skills that you need to manage your day-to-day finances or make the right investments during your life. The world of finances is one that continually shifts and updates, so you need to keep on top of it regularly. Even those who are relatively clued up kind find themselves falling behind very easily.
Not Setting Up an Emergency Fund
Another bad habit in the ‘not’ column is not setting up an emergency fund. If you fail to do this, it can easily end up that you are not prepared to deal with any challenges that may occur further down the line. After all, anyone can deal with financial challenges throughout their lives, but the ones best placed to weather the storm are those who have taken the time to batten down the hatches properly. Ideally, it would help if you had a few months’ worth of living expenses in your account. Between three and six months should give you enough of a cushion to get you back on your feet. The best way to set up an emergency fund is to automate your finances and channel some money into a separate account every month until it reaches a level that you are happy with.
Avoiding getting into debt can be achieved through the habits that you adopt throughout your life. The above techniques represent some of the things that you can do to put yourself in the strongest financial position now and in the future.