Statistics have found that debt isn’t about how much money a person makes, but how much money they can hang on to and manage. You’d probably be surprised at how many of the seemingly well-to-do people you know are actually buried in significant debt, and frantically trying to fix their credit as a result. But what makes debt such a trap for some people, regardless of their careers or income?
If you did some digging, you’d probably find that they share these five common characteristics of people in debt.
1. They Are Impatient
People in debt are often impatient and impulsive. “Sleeping on it” and window shopping is not an option for these people – they want what they want, when they want it. They are all too familiar with credit card payments and financing options, so they know they don’t need to have the cash in hand to buy whatever is appealing to them in the moment.
To break or avoid this habit, get yourself into a cash-only mentality. Know the balance of your accounts at the start of each day, and grant yourself a certain amount of cash for your purchases. If you can’t pay cash for it, don’t buy it.
2. They Rationalize
This goes hand-in-hand with their impatience. When they see something they want, there is always a good reason (or excuse) to buy it right then. These people often confuse wants and needs, and because they are also impatient they don’t take the time to think out the purchase to actually determine if what they’re about to charge is a need or a want.
To break this habit, reward yourself with experiences or free/less expensive things instead of things you can purchase. Also, take a picture of anything you’re about to buy and send it to a trusted friend or family member with the caption, “Do I realistically need this?” This will give you another perspective and also give you time to realize that you probably don’t.
3. They are insecure
The first two habits are often a symptom of this third characteristic, which is insecurity. For whatever reason, many people find comfort and security in tangible belongings or what they can buy – whether it’s a nice car, house, the newest smartphone, an exotic vacation, designer clothes, or what have you.
On the surface, it may seem that these people are happy, successful, and secure, so imitating them must mean that you’ll have that as well, right? Wrong. If you don’t have the money to do so, then you’re setting yourself up for the exact opposite. Stress, financial despair, and more insecurity as you constantly struggle to keep up with the Jones’s, who are more than likely trying to keep up with someone, themselves, is what you have to look out for when you jump on this bandwagon. Stay out of this cycle.
4. They Lack Perspective
People in debt rarely have much of a savings or retirement fund. They don’t think about the future or plan for the unexpected. They often have the, “it won’t happen to me” mentality, but that’s the thing about life – it always does. Maybe they’ll be lucky and avoid anything big, but even having the funds to repair or replace a flat tire, fix a broken window, or fly to visit a sick or dying family member may not be available for people in debt.
To work on this habit, start by calculating your monthly expenses and starting an emergency savings that can cover 3 months worth of expenses in case something happens. Make sure this fund is not easily accessible so you don’t dip into it unnecessarily.
5. They are disorganized
People in debt don’t know what days their bills are due, or what amount is due. They likely have bills on auto-draft to avoid missing a payment and to save time, but often find themselves hit with overdraft fees because the funds aren’t always there.
To avoid this, get yourself more involved with your finances by manually paying your bills each month. Set reminders on your calendar and phone so you don’t miss a payment, but if you take the money out yourself and can see the balance, you will have a better idea of what your financial situation looks like consistently.
Skip the cart
Shopping carts are big and getting bigger. Seriously. If it’s just a habit to grab a cart when you go shopping, opt for a basket instead. You won’t be able to fit as much and your arm will get tired, so you’ll naturally shop and spend less. This will help you stick to your list and avoid impulse shopping, so skip the cart and reach for a basket or your own arms instead.
These tips can help you gain control of your finances and rein in your spending.