Six Spending Habits That Lead to Debt

Six Spending Habits That Lead To Debt

Road signs are placed in strategic places for your safety. They warn you of impending danger. They urge you to slow down and be cautious or stop completely. There are some sure signs of heading toward debt too. Your spending habits may be signaling trouble ahead.  Recognizing these habits now could save a lot of money and stress later.

1. More Money Spent that Earned.

Many people are totally unaware that they may be doing this! After all if you only make $2,000 a month, how could you possibly spend $2,500 in a month? You might be doing it right now. Are you tapping into your savings, borrowing from others or using credit are primary ways of spending more money than you bring in.? You might be able to get away with doing this for a few weeks or months, but soon, your unhealthy spending habits will catch up with you. Before you know it, your savings is depleted, your credit cards are maxed out, and your ideas are depleted.

2. Spending money you don't have.

Usually, spending more money than you make is enabled by spending money you don't have. You spend money you don't have by using credit cards and taking out loans. When you use these instruments to pay bills and make purchases, you're creating debt. If you can't repay the debt each month, it will continue to grow.

3. Using credit for ordinary purchases.

You should use cash to make everyday purchases like groceries, gas, clothes, and entertainment. The appeal of credit cards is the ability to pay later for items that you buy now. The caveat is that you're less to pay your credit card bill for items that you've already consumed, which most "ordinary" purchases are. Using credit instead of cash is a bad habit, especially when you don't pay your credit card bills in full each month.

4. Using credit when you have cash.

One of the quickest ways to get into debt is to choose to use credit when you have the cash to make a purchase. People do this with a "something for nothing" type of mindset. They want to receive but they don't want to pay. The convenience of leaving your money in your wallet comes at a cost. Chances are, if you don't want to pay for it today, you're not going to want to pay for it tomorrow.

5. Using debt to pay off debt.

When you use credit cards to pay off other cards and loans to pay off other loans you're not paying off anything. You're just shuffling your debt around and incurring more debt each time you do so. Balance transfers have transaction fees and most loans have some kind of down payment or origination fee. So when you use debt to pay off debt, you end up worse off than when you began.

6. Having a "whatever" mindset and ignoring the signs

Not paying attention to financial detail and spending more than you have may lead to debt and slavery to the lender. The only way to break the cycle is to educate yourself and become aware of every penny you manage. Mismanagement steals your future.

Financial planning is quite simple you just need to do it!

*Article written by my Mother, Joyce Simmons www.dfmtoday.com