Happy Wednesday! We have a new guest post for you to get you motivated and conquer the rest of the week. This week’s article is from Good Nelly over at My Way of Viewing – a finance focused blog – and it’s all about financial habits you learn from being in debt.
Being in debt is perhaps the best way of breaking bad financial habits. When you’re in debt, you realize what led you to this.
However, you should follow good financial habits even after being debt free.
Here are a few good financial habits you learn when you repay debt.
Track your every dollar and learn the actual value of it
If you don’t track every dollar, a few dollars can disappear suddenly without you even noticing it. You will have no idea where you’re spending more.
When you try to pay off debt, every cent counts. So, you develop the habit of tracking each and every dollar you earn. You realize the importance of a $10 note since it can help you make a minimum monthly payment on a credit card.
This way, you also become grateful for every cent you earn and you understand the real value of money.
Plan a suitable budget and revisit it from time to time
Budgeting is the basic step in every financial planning. It helps you to check where your money is going.
You shouldn’t have an alibi for not having a proper budget. Yes, it takes time to plan a suitable budget but you need to do that, even if you need to devote time.
Also, planning a budget is not a one-time task; you need to revisit it and modify if required.
Learn the value of saving money on little things
Tell me, if you’re not in debt, will you think about whether or not a monthly subscription of $40 or $50 is worth it? No!
When you’re in debt, you actually count cents because all that matters for you is to save as much as you can and repay the outstanding debt amount.
This is when you start practicing frugal living, cancel memberships which you can do without, and start looking for extra income opportunities.
So, give it a thought! If you continue practicing these habits even after paying back debt, you’ll be able to secure your financial future.
This way, you can lead the life what you truly want to live.
Make a list before going shopping
You are bound to spend more when you go shopping without a list with you. The discount items will entice you when you go grocery shopping. But what’s the purpose of spending even $1 if you don’t need it?
So, always have a list when you go shopping. It is a good practice to have a list even when you visit the shopping malls.
It is not a good financial habit to visit shopping malls to spend your leisure time. Meet your friends elsewhere.
Stop impulse buying and focus on needs
This is actually a continuation of a good financial habit discussed in the previous point. Before buying anything, ask yourself, do you really need it?
When you’re buying a big-ticket item, give 2-3 days before you decide that you’ll buy it. Most times, you won’t feel the urge to buy that item.
Just as a person remains focused when paying back debts, you should maintain the habit of distinguishing between needs and wants. Doing so, you can spend on the items you really need.
Stop thinking what others think of your financial management strategies
Does it really matter what people think of you? Very few people come to real help when you struggle to repay debt.
So, you shouldn’t spend to please others. If you’re practicing a frugal lifestyle and you’ve decided not to eat out on weekdays, do not agree if your friends compel you to do so. If they’re real friends, they will support your decision instead of compelling you.
However, sometimes, you can decide otherwise but it should be your sole decision and not due to the pressure of your peer group.
Do not use credit cards for each and every purchase
Credit cards help you to have a good credit score. However, one of the bad financial habits you need to avoid is to use your credit cards, even if you can’t repay the balance at every billing cycle.
When you fall in debt, you tend to avoid using credit cards for every purchase since it’s easier to have control over your money when you spend real money.
However, do not cancel your credit cards and use them sparingly. And, make it a point to pay the entire balance at every billing cycle to avoid interest on the charged amount.
Debt support is more widespread than you think
When we get into debt, we learn pretty quickly about our spending habits, and that we should have cut back when we had the chance, but when it has hurt us so much that we consider filing for bankruptcy, it is possible to get the right support so you aren’t completely bled dry by the process.
Whether it’s filing a consumer proposal so you don’t lose your assets or a deal is struck with certain creditors, having professional debt support can arm you with the facts to get out of debt with your sense of self intact.
But it also makes you realize that if this cycle repeats itself you can find the support you need.
Following good financial habits is not enough; it is also your responsibility to teach your children about strong financial habits so that they can distinguish a good financial habit from a bad financial habit. Doing so, they will be able to stay away from bad debts and can manage good debts efficiently. In turn, they won’t have to look for how to be debt free as they won’t experience debt problems. So, start teaching your kids from a young age so that they become efficient money managers when they grow up.
Author’s Bio: Good Nelly loves to analyze the day-to-day financial happenings along with critically analyzing the changing rules of credit, debt, insurance, mortgage, etc. related matters. She loves to share her analysis with others thus helping people to understand the exact scenario.
Very important topic most people struggle with. The article seemed to suggest that people are in debt because of bad spending habits and this is true for some people but a lot of people are in debt because of other factors like cost of living increases that their wage can’t keep up with. What strategies would you suggest for people in those types of situations?
Hi Crystal! That’s a great question that I see a lot of people ask. Whenever your cost of living becomes more than what your wage can keep up with, I always ask if there is a way you can reduce your expenses. This could be the obvious spending less on clothing, eating out, and groceries to your monthly payments. Reducing a payment could be on a utility or cell phone bill. Often times, you can switch providers and save money. Another payment most of us have is our mortgage or rent. If you’re in a high cost of living area, are you able to 1)move to a less expensive home or 2)move completely to another city or state that has a low cost of living.
If you don’t have the option to reduce expenses or you are living as low as you can go, the other option is to increase your income. This could mean getting a second job. But often times people are able to create a side hustle. Selling your (or someone else’s) things on Facebook Marketplace, eBay, or other sites is a simple way to increase your income. You could also look to work online as a virtual assistant or as a tutor/teacher through VIPKid or Chegg.
Let me know if you have more questions! I am happy to answer.