It’s probably safe to assume that no one wants to drown under the waves of debt. It is almost impossible to make perfect financial decisions all the time, and you can expect some slip-ups occasionally. While you may not set out deliberately to incur debt on yourself, certain daily habits and poor money choices can put you in a difficult financial situation. So do you find yourself constantly in debt and can’t seem to find a way out? Read on to see if you’re guilty of any of the following habits that trap people in debt.
Spending more money than you make
The rule here is pretty simple — if you spend more money than you make, you’re going to drown in debt at some point. That’s because you may have to borrow and keep borrowing to keep your head above water. If you already have some savings stacked up for future emergencies, you’ll be more likely to dip your hands into that and deplete it sooner or later.
Regardless of how easy you may find it to source funds from elsewhere, your sources will run dry at some point, leaving you stuck in debt. The way out? Live within your means.
Failing to save or invest
It is easy to feel some sense of financial security if you have enough money to spend. But money runs out at some point if there’s no steady source to keep it flowing. That said, one of the reasons many people end up in debt is that they fail to save and invest during the days of plenty. Experts recommend putting aside at least three to six months worth of your monthly expenses as a form of an emergency fund when the dry season comes. But beyond that, you can also consider investing long-term to secure your financial future. Thankfully, there are loads of investment options to choose from, depending on your financial muscle, from property investment to stocks.
Shopping as a hobby
For many people, shopping is more than just buying new things; it is a hobby that helps them relax. But while a good shopping experience may ease your mind and make you feel good about yourself, it can also drag you into debt over time and keep you there. Even if you have the means, mindless shopping and impulse are two habits you want to get rid of as soon as possible.
Ignoring how much debt you owe
Ignoring your debts will not make them go away, nor does it mean those debts cease to exist. Ignoring your debt could mean that the amount you owe will only keep going up if they come with interest. Take the time to list all of your balances, from your credit card activities and store cards to your mortgages and students and everything in between. That will give you a clear idea of how much you owe, and you can use that to develop a good payment strategy. Additionally, it is necessary to calculate your debt-to-income ratio and do your best to keep it below 36%.