Are you feeling like you’re living paycheck to paycheck and drowning in debt? We all like to purchase things to make our lives more comfortable and practical. The problem is when we, due to lack of knowledge or discipline, buy more than what we can afford and end up in a massive pile of debt. Here are seven financial habits that keep you in debt:
1) Buying on impulse
Who hasn’t ever felt happy about purchasing something new? Shopping can make us feel excited, and that feeling can become addicting. Did you know that many times we get more thrilled with the anticipation rather than with the product itself? One way to avoid impulse buying is by sleeping on it. For example, when you’re at the shopping mall, and you see something that you want to buy, come back the day later. Do you still feel that urge? You’ll be surprised that, more often than not, you won’t feel like buying the item anymore.
2) Only paying the minimum amount due
Missing your monthly minimum payment can deeply hurt your credit score. Credit card issuers will also charge a late fee and forfeit the promotional interest rate if you have a balance transfer credit card. A good recommendation is to pay your balance in full, but if you don’t have enough money, pay more than the minimum. By doing that you will pay fewer interest fees.
3) Buying to be happy
Emotions heavily influence our purchase decisions. Marketers know it quite well. We’re bombarded every day by emotion-based advertisements, that target our need for acceptance, self-worth, among other things. One way to change this habit is by identifying the trigger and finding other alternative activities to make you happy, such as dancing, baking, or even calling a friend.
4) Not having an emergency fund
One of the biggest financial mistakes people make is not having an emergency fund. This money that you save up for unplanned expenses is super important if you want to get out of debt, because it will help with things like repairs or medical emergencies, and will help you avoid having to owe even more money. Having money for emergencies also reduces anxiety, since you will be prepared for the unknown.
5) Living above your means
If you live above your means, it won’t matter if you earn a thousand, 100,000 or even 1 million dollars, you’ll always be in debt. To be financially stable, you have to list your expenses and start evaluating them. Eliminate what’s not necessary and save or invest at least 20% of your monthly income.
6) Refusing to make financial sacrifices
Since creating a budget and sticking to it is not that easy, most people don’t even try. However, if you want to be financially stable and avoid getting buried in a pile of debt, it’s something you will have to do. You will also need to study how to invest your money to get a higher return rate.
7) Not knowing how much you owe
Most people tend to undervalue how much money they owe. It’s scary to put everything down on paper, but it’s a step you need to take to get out of debt. After you’ve done this, you can create your strategy to get out of this messy situation. Start by paying off the debt with the highest interest rate first. If you have a lot of credit card debt, you can also transfer your balance to a 0% intro APR card.