Money Mistakes that Keep People in Debt
Debt: It’s a word that people hate for understandably good reasons. Do you often find yourself questioning why you don’t have the money to pay a bill? Or maybe why you can’t seem to build up a slush fund? It is likely because you are making one (or more) of the money mistakes listed below. Money problems are never going to go away on their own. Unfortunately, there are no crystal balls here. It’s up to you to want to make a change and to stop making these very common money mistakes.
Money Mistake #1: Never Truly Paying off Credit Cards
Paying off or even down a credit card is a great feeling of accomplishment. However, what I have learned over the years is that it is difficult for people to keep balances off of their cards. I have met people with the mentality that because they have paid $200 towards their credit card, now they have an additional $200 to spend on something else. This kind of mindset is going to keep you from getting out of debt. The end goal with credit cards should always be to pay them completely off every month.
If you have found yourself in a constant pay and charge cycle, sit down and take a hard look at your financials. I understand that it can be overwhelming, but your money problems are not going to go away until you act on them.
Fun Fact: Credit card interest is charged on a daily basis, generally using an average day balance. Someone with an average daily balance of $2,500 and 19% APR could be looking at paying $39.04 in interest per month. That could be gas money for the week, but instead is being paid to the bank.
This is a great article, found on The Simple Dollar that goes in more depth on calculating interest rates. https://www.thesimpledollar.com/how-is-credit-card-interest-calculated/
Money Mistake #2: Buying Unnecessary Things
Listen, when it comes to what you buy with your own money that is nobody’s business but your own. With that said, let’s face it there are is a lot of unnecessary STUFF out there that you simply don’t need. Do you buy things just because there is a “great” sale going on? Is your shoe addiction out of control? Did you really need the latest phone or tablet? Did little Susie really need a large $20 stuffed bear for Valentine’s Day?
If you’re wondering why you are always in debt, take a look at the things you are buying on a daily or monthly basis. Start focusing on your and your family needs, not the wants. All of these “small” or large purchases are going to add up over time. Give yourself a budget on what you can affordably spend on miscellaneous things each month and stick to it.
Money Mistake #3: Eating Out
People are busy these days and it can be convenient to order takeout or roll through a drive thru for meals. With that said, it is generally going to cost more to eat out versus eating at home. Take breakfast, for example, there are plenty of foods that can be bought for breakfast that will cost less than what it would cost to buy a sandwich at a fast food restaurant. Then add in the possibility of eating out for lunch, as well, and now your food expenses for the day are really starting to add up. Spending $5 here and there may not seem like a lot of money, but pull your bank statement from the month before and you may be surprised how much you are spending on food.
If you struggle with eating out, try these couple of tricks. Start thinking of food as a way to provide nutrition to your body, not to provide comfort. Fast food is not something that you can enjoy for months or years on end. You eat it and then it’s gone. Also, look into meal prepping your lunches or dinners for the week. Amazon has a whole slew of books on meal prepping that can help you on your journey. Not only can this save money, but depending on your meal prep, is also going to be a healthier choice than the alternative.
Money Mistake #4: Opening New Credit Card Accounts
Credit card companies send out enticing deals on a regular basis. If you are someone that has a hard time passing up great promotions, this may be keeping you in debt. It is OK to have as many credit cards as you want so long as you are paying them off each month. If this is not the case, start reining those credit cards in to regain control of your finances. The more credit cards that you have and USE, the more likely you are to find yourself in debt.
Another thing to think about is if you are doing a balance transfer. Sometimes it may be worth it to transfer the balance of a high interest credit card to one of no interest. If you do decide to do this, make sure to “hide”, shred or otherwise dispose of the old credit card. You don’t necessarily have to close the card as it may hurt your credit score, but you should put it away so you don’t use it. What tends to happen with some people is they end up using both credit cards and find themselves in a worse situation than what they were before they opened the new one. Avoid this scenario at all costs by ridding yourself of the old credit card.
Money Mistake #5: Living Outside Your Means
This is pretty self-explanatory. People today are buying houses, cars, clothes and a variety of other things that they simply can’t afford. Then wondering why the amount of debt just keeps piling up. Buy a house that you and your family can live comfortably in and still be able to save money. Just because the bank tells you that you can afford a $300k house doesn’t mean you NEED a $300k house! You know best how much you and your family can afford on a mortgage; make sure not to overextend yourself. The last thing you want is to be house poor.
And of course this last section wouldn’t be complete without the Jones’. For the love of all things, forget about the Jones’. It can be so hard in today’s time not to compare yourself to your neighbors, friends or family, but just because Johnny next door buys a camper doesn’t mean you need one too. Always remember, so long as you are providing housing, clothes, food and other necessities for your family you are doing your job – and a damn good job, at that!
Money tends to be an un-fun topic for many people, but it doesn’t have to be. If you have found yourself in a bad money situation, all is not lost. Make a budget and start chipping away at the debt that has accumulated. As much as everyone dreams of winning the lottery and making their debt disappear, the fact of the matter is that is very unlikely to happen. The sooner you start to take care of your money problems, the happier you will be.