Generally, debt is not a financial, but a habitual problem. Debt doesn’t accumulate overnight. It usually builds gradually over time. To solve your debt issue, you need to fix the habits getting you in debt first.
Get these 7 habits under control and you’ll not have to worry about debt again.
1. Emotional Spending
Emotional shoppers can get addicted to the endorphin high that comes along with the purchase. This can turn spending into a physiological habit. Excessive spending is about the experience from buying the stuff and not the stuff itself. A much better habit is to spend based on needs and not on wants. Plan shopping rather than buying spontaneously. Implement a 2-day rule for all non-planned purchases. Let your emotions settle down, think clearly and decide whether you really need this item.
2. Addiction
Similar to emotional spending is addiction. Any uncontrolled addiction can easily spiral into debt and create even worse trouble for yourself. Avoid all forms of addictive behaviour (biggest culprits are drugs, sex and gambling).
3. Entitlement
Seeing celebrities, family and friends posting pictures of their designer clothes, big screen TVs, gadgets and new cars on social media causes a lot of the entitled behaviour you see nowadays. Buy only what you can afford to pay immediately. You’re entitled to what the balance in your savings account (and not what your credit card limit) shows.
4. Instant Gratification
Closely related to entitlement is instant gratification. You want it now and are willing to pay on credit so you don’t have to wait until you have enough money saved up. Pursue delayed gratification instead. Put purchases into the context of your long-term financial goals. Spend for tomorrow and not for today. Buy what brings you closer (and not further away) to the long term goal, you set yourself.
5. Associating Self-Worth with Stuff
Debtors buy into the false belief that happiness is somehow connected to more-better stuff. Good advertising manipulates you into believing products will make your more attractive, smarter, happier, and live longer. But separate your spending from your self-worth. Your possessions don’t define who you are as a human being. Buy items that satisfy your needs and not something to contribute to your self-image.
6. No Plan
Debtors disconnect spending, saving, and earning from each other. There is no budget, no plan for retirement, no tracking of numbers, and no strategy for increasing earnings. The debtor lives month to month because there’s no plan to do anything different. Create a plan and work your plan. Build an emergency fund, choose affordable insurance so you’re not totally exposed, and automate monthly savings so you don’t have to think about it.
7. Complacency
Nothing accelerates debt more than complacency. Not taking action is the worst thing you can do to alleviate your debt problem. Debt doesn’t accumulate overnight. It’s a series of small impulse purchases that eventually add up to serious debt. Debt also does not go away over night!
Be proactive about getting rid of your debt. Using credit cards to pay for your living expenses and stressing over money are warning signs. Take action!
Tip: Cut up your credit cards and stick to only using cash until you get back on track. Don’t think credit is your money to spend. Only spent what you already have got in your bank account.
Sven Franssen