Common Money Mistakes That Cause People To Stay In Debt
If you’re like the average American, you have thousands of dollars in debt
More than likely, you accumulated it by making some very common mistakes.
In late 2016, Americans’ average credit card debt load reached $16,000. Add in mortgages and student loans, and the typical American owes more than $132,000.
We know, that’s a lot of zeroes. Enough to make you want to throw up your hands and accept debt as a way of life.
Don’t do it.
You got into debt because you made common money mistakes. You can get out of debt by making some simple money changes.
Here, we present to you the top money no-nos — and what you should be doing instead to get out of the hole and on solid financial ground.
“Keeping Up With the Joneses”
We all do this to some extent.
The neighbor gets a new car, so we start shopping ourselves. Our coworker comes to the office carrying the new celebrity “IT” bag, and we head to the mall on our lunch hour.
This kind of thinking is misguided. You have no idea how the Jones’s are paying for their Beamer. They very well may have signed a ridiculously outrageous deal and are regretting it every time they get behind the wheel.
While it’s natural to want the nice things in life when it comes to your finances, you have to decide what’s most important to you — and then go after them. Do you want the nice things even if it means being in debt? Or do you want an authentic life that strikes the financial balance perfect for you?
Changing your financial situation begins by changing how you think about finances.
No Budget? Sure Way to Stay in Debt
If you decide to get out of debt, be forewarned, it will not be easy.
You will have to create and abide by a budget, and you will have to make some tough sacrifices.
How to begin? First, track your spending for a couple months. You can do this the old-fashioned way with a notebook and pencil, but there are also all sorts of apps available.
Once you know what you’re spending on what, you can identify ways to cut back. Spending $10 a day on lunches out with coworkers? That’s $2,600 you could be saving by bringing your lunch from home — and $2,600 you could be applying to your debt.
Will it be hard giving up lunches out or your daily coffee habit or your weekly manicures? Yes, but you can do it, and think about what you’ll be getting in return.
No Preparation for Emergencies
Life will always throw you curve balls. You’ll have a flat tire, or a washing machine that overflows or pet who needs surgery.
If you have the money set aside to handle these situations, no problem. But if you don’t, and have to rely on your credit cards, you’re only falling farther into debt.
Once you have your budget in place, use the money you save to pay down debt AND build your savings.
A good rule of thumb is to have three months’ worth of expenses socked away if you’re a two-income household; six months if you’re living on a single income. But, honestly, any savings is better than none.
Your debt is not insurmountable. You can get free, and this is how you start — but it’s only a start.
Keep learning about your financial situation and connecting with others who can help you get out of debt — and even start building wealth.
Ready to take this to the next level? Click here to join the Millionaire Mindset University