We all have our creature comforts – those habits that, for better or worse, we indulge on a daily basis.
However, while a regular morning latte or a new pair of shoes might seem harmless, you’ve got to consider their effect on your bottom line. A naira here and a naira there add up over time – and, despite your efforts in other areas, they could be one of many reasons you’re still mired in debt.
Those of us who find ourselves experiencing chronic debt problems often share similar behaviors and financial habits. If you catch them early enough, you can avoid trouble. But even if you’re already in the red, recognizing and adjusting these behaviors can help you get back on track.
Bad habits of perpetual debtors
1. Impulse Buying
Those who are constantly in debt are often the type to snatch up something whether it’s on sale or not – even if the purchase wasn’t exactly planned. However, impulse buying can lead to a series of dangerous spending behaviors:
- Justifying Unplanned and Poor Purchasing Decisions. By justifying a “need” for an expensive bag or new gadget, you allow yourself to overspend and find reasons why it makes sense.
- Using Your Credit Card for Impulse Purchases. Because impulse shopping is unplanned, you may not actually have the funds to cover costs. That means you’re using credit to purchase items you can’t afford.
- Losing Track of Your Budget. Even the most diligent budgeter can mess up every now and again. However, impulse spending causes you to lose sight of your budget and your financial goals: When you decide your budget is already blown, you might just keep swiping that card – and that’s a slippery slope.
While an impulse buy here or there may not leave a lasting impression on your finances, making it a habit can seriously derail your goals. Develop a plan that helps you cope with that irritating itch to spend without thinking.
2. Using Credit Cards for the Points
Not all rewards credit cards are evil. In fact, when used responsibly, some definitely have their place in your wallet. However, there’s a reason credit card companies offer those rewards, and it’s definitely not out of the goodness of their hearts. Rewards encourage you to spend more, plain and simple.
3. Keeping up with the Joneses
Real estate agents often say that it’s better to be the worst house on the best street than the best house on the worst street.
However, when your neighbors seem to have it all, the drive to be the best house on the best street can overshadow your spending savvy. Competition is a psychological trigger that can cause spending, and keeping up with the Joneses – or competing against family members, neighbors, or friends – can lead you to overspend.
4. Shopping to be happy
Raise your hand if you’ve ever gone on a mood-based spending spree. If you have, you’re not alone. Shopping can actually release endorphins in the brain, similar to other activities such as exercise, sex, and even eating chocolate.
Unfortunately, like those three things, spending money in order to feel good can actually become addictive.
Shopping to boost your mood creates a link between happiness and buying material goods – and it’s a link that can be seriously hard to break.
Are we saying that all shopping is bad? Of course not. You just can’t do it to help you feel better at the end of a bad day. When you do go on a shopping trip, make sure you find ways to save money. Plus, shopping online can help add cash back to your wallet as well.
5. Expecting a miracle
Often, people who are consistently in debt mistakenly believe that righting their finances would take a money miracle.
However, you’re never going to get out of debt by winning the lottery, landing a windfall from a wealthy relative, or having the world’s best-paying job simply fall in your lap.
What makes this way of thinking so dangerous is that it removes you from a position of control. When you’re hoping for someone else to swoop in and save you from your bad habits, you’re handing over the financial steering wheel and emotionally cutting yourself off from your debt. Of course, we all know that your credit, debt, and lifestyle belong only to you – and only you can solve the problem.
Instead of waiting for a miracle, start opening your bills and taking the time to make a budget. Set up payment agreements to stay current, pay all new bills on time, and remember that you’re the one who is affected when you’re stuck in debt.
6. Excessive lifestyle inflation
As you get older, you probably expect to achieve a better financial status than you had as a young adult. A better job, a raise, and even natural economic inflation can all affect your earning power.
However, the difference between those who are always in debt and those who stay in control of their own finances is that the perpetual debtors buy more than they can afford.
7. Keeping debt out of sight and out of mind
When you put your fingers in your ears during the debt conversation, you’re engaging in risky behavior that could plunge you even deeper into the red. Those who tend to ignore their debt may engage in the following red-flag behaviors:
- Avoiding phone calls from creditors and collection agencies
- Ripping up bills and statements before they’re opened
- Becoming visibly uncomfortable, defensive, and angry when debt is discussed
- Not knowing how much debt is owed
Getting hit with late and nonpayment fees, dealing with collections, and falling deeper into debt than you realized are all consequences of taking an “out of sight, out of mind” attitude toward what you owe. It’s dangerous and simply perpetuates your bad behavior.
8. Taking interest-free loans
Like credit cards that offer points and rewards, stores that offer no-interest loans are simply luring in potential debtors and enticing them to spend more than they can.
The sad part is that many people who bite on such offers won’t pay off their loans before the interest-free period ends, after which they’re often slammed with fees and even retroactive interest from that so-called “interest-free” period.
Always read the fine print, and remember: Unless you’re certain you can pay it off before the grace period ends, interest-free loans are anything but.
9. Only paying the minimum
Paying the minimum every month doesn’t mean you’re getting out of debt – in fact, minimum payments are often calculated to be about 4% to 6% of your balance, which could mean you’re not only staying in debt, but actually accruing more interest.
When you open your credit card statement, remember that you owe the balance – not just the amount listed under “minimum payment.”
10. No debt planning
With a plan in place, attacking your debts becomes a lot less overwhelming. I could see my balances going down and accounts being closed, which motivated me to keep going.
Paying off debt is great, but trying to do it without a plan in place can leave you throwing your hands in the air and returning to your bad habits. You have to plan ahead and know where every dollar is going if you want to quit your harmful behavior and start fresh.