Monday, January 22, 2018

Spending Habits That Lead to Debt

June 8, 2010 by  
Filed under Finance

Reckless spending habits often form one of those prime reasons that give rise to hefty debts. Being careless about your financial routine can land you knee deep in debt. In a way, we invite debts ourselves. A little careful you are with your finances and you can prevent yourself from being under debt. But people rarely realize this; a large number of Americans today are struggling to clear their debts and opting for debt consolidation services. What can be the reasons for this? Read on to know.

  1. Spending more than you earn: This is the biggest mistake that you can make. But one might ask how is it possible to spend more than what one earns? Well, purchasing things on credit is an easy way to do this. The ease of swiping your credit card for purchases tempts you to think that you are not spending your real money. This leads most people to buy things which they cannot actually afford. Gradually, you max out your credit card which drives you further into the hole.
  1. Using credit for everyday purchases: Stop using your credit cards to make everyday purchases like groceries, gas etc. Use your cash instead. If you cannot buy something with what you have, you better do not buy it all. Using credit card instead of cash is a bad habit, especially if you cannot pay off your balances in full at the end of the month.
  1. Exhausting all your money: Many people are irresponsible with their spending. Exhausting all your money and not saving up for emergencies can be disastrous. Emergency expenses can arise any time and it is wise to be always prepared for it. Relying on your credit card in these situations can push you further into debt.
  1. Making purchases with installment: Attractive installment offers can lure you to buy things which are beyond your affordability. Many a times, people make their purchases through installments using their credit cards. When the monthly statement arrives, installment is charged into the credit card. If this balance is not cleared fully, it will gradually build up into debt.
  1. Resorting to more debts to pay off existing debts: Using your credit card to pay off other cards is the worst you can do for yourself. Similarly, taking out a loan to pay off another loan is also not advised. These just invite more debt. You need to pay transaction fees with balance transfers and with most loans there is some kind of down payment involved. Therefore, you can be pushed further into debt.

Bad spending habits are the root cause of falling into debts. Have a specific goal, and with careful planning and wise money management you can avoid debts forever!

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