5 reasons you’ll never get out of debt
If you can't break free of these five fatal flaws, you'll likely be drowning in credit card debt until the day you die.
This post comes from Maryalene LaPonsie at partner site Money Talks News.
Christmas is fast approaching, and that means money is going to start flying out of your pocket at break-neck speed. It doesn't matter how much we talk about the spirit of the season being what really counts. The reality is the holidays mean paying for presents, parties and extra food. If you are already struggling under a mountain of debt, it only gets worse.
It may be tempting to think you’ll charge one last holiday and buckle down in January, but that is the mindset that keeps you in debt. Trust me. I may be debt-free and have an emergency fund now, but I could tell you about the Christmas we searched for a tree farm that took checks because there was no money in the bank and the credit cards were maxed out.
What changed? It wasn't our income, that's for sure. It was our mindset. Unless you change yours, here are five reasons you’ll never get out of debt.
Some people are number geeks and could spend all day slicing and dicing their budget numbers. You know who you are.
For everyone else, budgets can be boring, restricting, dumb…pick your favorite adjective. However, if you don’t know where your money is going or even how much you make monthly (believe it or not, some people don’t), you’ll never get out of debt. You won’t know if you are able to pay off the groceries you are charging or if you can put money into savings. Every time you open your bank account, it will be a crapshoot whether there is money there.
Tracking your expenses used to entail pencils, spreadsheets and agony. Now you can simply use a service like that provided by our partner, PowerWallet, to do everything for you effortlessly and free. No more excuses.
Once spending money becomes a form of recreation, you can probably kiss your savings good-bye. Unless you have a large amount of disposable income, chances are you can’t afford to be spending indiscriminately.
And that’s what people do when they shop for fun; they spend on a whim. They see something they want, and they buy it with no thought to whether they need it or can afford it. If you pass your time wandering aimlessly at the mall or surfing retailers online, don’t be surprised if your savings account balance hovers around the single digits while your credit card balance climbs to its ceiling.
Likewise, you will never get ahead if you are running with a crowd that is constantly trying to one up one another. Keeping up with the Joneses is not good for your pocketbook.
I don’t want you to ditch your good friends, but I do think it's smart to consider whether you need to be spending time with casual acquaintances who are more interested in keeping up appearances than in keeping up your friendship.
Instead, look for like-minded people who appreciate you for who you are even if you can’t afford to be dining at that swanky new restaurant every week.
This was one of my downfalls. I always had an excuse for why I couldn't get my money under control.
- As soon as the holidays are done, I'll write out a budget.
- As soon as I get a better paying job, I’ll start paying down our debt.
- As soon as I finish buying the last of the Disney movies for the kids, I'll stop spending.
The timing will never be perfect. Smart money management is like dieting and exercise. You will always find a reason to put it off. Waiting for the stars to align is a sure-fire way to remain in debt indefinitely.
Let’s get right down to it; you may be in debt and you may stay in debt because you are simply too lazy, too weak or too self-indulgent.
Remember, I’ve been there. I’m not judging; I'm looking in the mirror. We want to think our debt is the result of forces outside ourselves – the hospital stay, the lousy economy, the housing market. However, at the end of the day, we need to take responsibility for our own actions.
I am not talking about the people who are living in poverty, and I am not talking about those who experienced something catastrophic, such as a total disability, that pushed them over the edge.
I am talking about us middle-class families who live like we are upper-class families even though our paychecks can't support the lifestyle. We need to acknowledge our part in our debt. The fact is maybe, just maybe, if we lived below our means and saved for a rainy day, we would be able to weather life’s storms a little better.
For me, my character flaws were self-indulgence and weakness. I had a hard time saying no to myself when I could so easily justify purchases with the idea that "everyone uses credit cards." By the time I hit that fateful year in which I had no money and no tree a week before Christmas, I had dug myself a deep hole, one that would take nearly 10 years to climb out of.
But today, I have money in the bank and don’t freak out when the van makes a strange noise because I know I can pay for a repair. It’s a wonderful feeling. I love living this way, and I know you will too.
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WOW an MSN article that actually suggests taking responsibility for your actions? nah, must be a mistake.
I was taught that a credit card was just a convience and that they must be paid off every month, a savings account was not an option but a necessity and it was crucial to put away for your retirement. I thank my parents for instilling these values!
I hate that I have a mortgage and am eagerly awaiting the day it is gone! I love seeing that principal balance go down :).
When I was young I bought only what I needed and keep my cars for at least 10 years, fixing it when I had problems. I put away the same amount of cash into savings which I had made on car payments so that by my third car I paid cash.
After that the only debt I took on was for a house and I made 1 1/2 times the payment due and increased that as I made more money. So that by the time I hit 55 I owned a home a new car paided for everything with cash.
I have gone from the son of a coal miner to a millionaire now that I am 65.
Christmas gifts were always made items till I had my son and then they stayed below fifty bucks for each and every person.
Now I can give my offspring enough so that they don't have to go into debt for anything but their homes and they do it the same way I did.
So take on as little debt as possible, including no credit cards and you can do the same thing. It just takes the attitude that "I don't have to have it today!" It can wait till I earn enough to pay cash for it!
Now, "drowning in debt" can have a double meaning: 1) you intentionally buy/consume "unreasonably" with credit until your income can no longer service the debt repayments; and, 2) Your income is reduced or lost due to circumstances beyond your control and you can no longer service "reasonable" debts, i.e., house, car, utilities, etc.
It is wise to budget and stick to it. However, your budget must be realistic. The best way to budget is to do a financial statement and a cash-flow to see what you have and what you have to work with. Looking at your spending history is important. You can see where your money went in the past and you can prioritize what is most important to you and your lifestyle. Estimate what you think you might reasonably spend on different items, and adjust accordingly to fit in with cash availability. There are going to be some items that are going to be fixed, or have only a slight variation from month-to-month, and year-to-year. So, you will need to build in a buffer of 5 - 10 percent over that estimate. There are other items that will vary from month-to-mont, or year-to-year that may not be so predictable. Here is where you need to decide how much you need to put into savings to build up a contingency fund to handle those more widely fluctuating amounts and/or emergency expenditures like an appliance that takes a dump on you. Granted, there will always be that possibility that something will come up that wasn't planned for that requires time-payments. So, you need to leave yourself enough elbow room with your budget to accommodate such payments. As long as you keep your budget within manageable parameters, you have a better chance of avoiding "drowning".
So, what's the purpose of a "financial statement"? A financial statement will give you a picture of your "worth". What you have for fixed assets, liquid assets, debt against them, and their current value. This will give you your "net worth", which tells you what you have been able to accumulate financially and whether or not you have gained or lost ground since the last financial statement. Why is this important? Because, for many people that "net worth" is also their retirement investment. You will also see by doing a financial statement which of your assets is appreciating and which are depreciating. I hope you get the picture of why it is important to take a look at yourself regardless of scary the prospect might be:<)`
I too have no debt and it took work and planning during my working life to say that now. I retired at 55 and do what I want when I want but always knowing that there are limits. As long as one rationalizes and makes sensible decisions in regards to spending you can do the same. It is not difficult but does
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