Debt is not about how much money you earn, but how well you manage it. You may be surprised to discover how many of those people who seem to have it all are actually up to their eyeballs in debt. To an extent, debt is a question of habit. But what is it that makes some people more susceptible to debt? Here are five bad habits common to those in debt.
People who find themselves in debt tend to be impatient and impulsive. The easy availability of credit means that the traditional approach of saving up for something you want can seem old-fashioned. But this habit of impatience and being unable to sleep on a potential purchase can open the door to personal debt problems. To get out of this harmful way of thinking, try to develop a cash mentality. Set aside a certain amount of money for purchases each day, based on your account balance, and if you can’t afford an item, don’t buy it.
Rationalisation follows naturally from impatience. When you lack the patience to wait to buy an item you want until you can afford it, you will often try to find a reason (let’s call it an excuse) why you should buy it immediately. Essentially, this confuses needs with wants and enables you to justify buying things you can't afford. To get out of this habit of rationalisation, one tip is to ask a friend or family member if you should buy a particular item. That will give you the benefit of another person’s perspective and some breathing space to think it over.
Rationalisation and impatience are often related to a sense of insecurity or unhappiness. For some people, buying the latest gadget or having a new smartphone or car provides them with a feeling of status or worth, or simply offers comfort. But buying things you can’t afford is simply storing up unhappiness for the future. The despair of debt will overwhelm any temporary boost you get from buying something you can’t afford and don’t need, so try to keep out of this dangerous financial-emotional cycle.
Lack of perspective
It is common for people in debt not to have put much aside for the future, either in terms of savings or a pension. They are focused solely on the present and lack the perspective to think that they might need extra money in the future. Life has a habit of throwing up expensive surprises and you may find your options severely limited if you are in debt. To tackle this habit, work out your monthly expenses and start putting together a savings fund that could cover three months’ worth of outgoings in the event of an emergency.
Lack of organisation
Typically, people in debt will be disorganised. They often don’t know how much they owe, when their bills are due or how much is in their account, and the process of getting on top of it all can seem overwhelming. But the only way to tackle this problem is to get organised. Set reminders for when bills have to be paid, work out how much debt you have and how you are going to pay it off, and check your account balance regularly.
Being in debt can be incredibly stressful, but the path out of debt is made a lot easier if you can recognise and change the bad habits that can contribute to your bad financial situation.