Staying debt-free doesn’t seem that hard in theory. All you need to do is spend what you can afford, right? Well, the millions of Americans in debt would disagree. It is not that simple. Anyone can easily sink into debt if they don’t have the right attitude towards spending and money management.
Many people have the “buy now, pay later” mentality. If you don’t want to slide into the debt hole, here are 10 things you should avoid.
Paying Off Debt Using Savings
When you have a high-interest debt and some money in a low-earnings savings account, you may see it wise to pay off the debt with the money. But this strategy can blow off in your face. You will end up making things harder for yourself. You will not have any cash for emergencies. If you get an unexpected expense, you will be forced to borrow again to take care of it.
Splitting Cash for Bill Payment
Say you have an extra $600 and decide to send $200 to three creditors or $100 to six creditors. This is not as smart as it appears to be. Small payments will not make much of a difference. Focus on one debt at a time.
Most subscription plans don’t cost that much. So you sign up on a number of them. When you add all your plans up, you will see how big of an impact they have on your savings and other goals.
You can buy anything with financing nowadays. What you don’t know is that with financing, you end up paying more. And you will also start buying things you don’t necessarily need.
Long-term Auto Loans
With most institutions, you can now finance a car for up to seven years. You may not even keep it working for that long. Always opt for a shorter period and a cheaper model.
The Rewards Game
With credit cards offering rewards, you may find yourself charging more purchases to win the rewards. but just keep in mind that you will have to pay off the balance plus interest rates.
Trying to Please People
Some people get into debt while trying to make others happy. You want your spouse to have a nice vacation or the children to enjoy their holidays. Communicate with your loved ones and help them manage their expectations.
Lack of Financial Planning Knowledge
A good number of Americans don’t know about financial basics. They have no idea how rent-to-own agreements, payday loans and other plans work. Fortunately, there are a lot of apps, websites and financial books with all the knowledge you need.
Almost all the purchases you make are optional. A new car is not a necessity and neither is that expensive degree you are financing. If there is a more affordable option, go for it.
Assuming That Debt is a Way of Life
Tons of people believe that debt is normal. There is no way to be debt-free. But you can change your mindset and be intentional about finances.