There can be many reason’s a person find’s themselves in debt, whether through poor money management, job loss, the list is endless and very unforgiving. We have put together a list of the 8 reasons you are still in debt.
Do you have a budget?
The amount you are spending per month may shock you.
Firstly we recommend gathering one month’s worth of spending receipts etc., perhaps creating a spreadsheet listing all spending (no cheating). Every dollar you spend needs to have a home such as electricity, grocery, gas, etc.
Once you have those numbers, go about formulating a budget that will enable you to pay down your debts. When we implemented this strategy, we were shocked by how much we were spending in some areas, and we immediately saw areas we could make major cutbacks.
How Much Do You Owe?
Ignorance is bliss. However, this won’t pay down your debts!
Firstly on a spreadsheet, list all of your creditors and I would recommend contacting them to confirm the total balances. This list should include store cards, credit cards, student loans, car loans, and mortgages. Seeing how much you owe may be just the motivation you need.
Always remember knowledge is power, regardless of the size of the debt you owe, never lose your power. When our life took a downward spiral, we put our heads in the sand and lost our power.
Then finally we took back our power and control of our debt and budget and things started to change.
Do You Have A Credit Card?
Have you ever thought about changing to a Debit Card?
It is an excellent alternative, you can still make purchases, but you are not spending money you don’t have. We made the decision during our period of paying off debt to no longer have credit cards.
We are by no means against them, but for now they don’t fit with our system. Many people prefer to use credit cards, but it is important to remember you always have the option to transfer your balances to other companies. Especially if they offer you a lower interest rate.
Once you find the right choice and you are ready to do a balance transfer, first check with your current card provider to see if they are willing to match the other company’s offer.
Do You Have An Emergency Fund?
Emergency Fund has now become a household phrase, but not having one can be very disruptive to your finances.
Life happens, so you need to plan ahead for those rainy days. It is recommended that we should have three to six months of living expenses in our fund.
An excellent goal if you’re just building your fund is $1,000. If the refrigerator or washer needs to be replaced then it is better to use the fund rather than taking goods out on credit.
At the point of creating your budget for the months ahead, it is important to have the plan to build this fund.
Do You Impulse Buy?
I would undoubtedly say we were culprits of this for a time.
Thankfully the most important lesson our journey has taught us is to shop around, and in doing so we are less likely to impulse buy. We would now describe to friends and family about the great bargains we have found, really it is like a game where the winner is the contestant with the most money at the end.
What we have discovered is that it really can be quite astounding the differences in prices and quality.
I know we would have assumed the more expensive the item, the better the quality, but during our journey we have found that quite frequently the less expensive items can be of excellent quality.
Do You Smoke?
Smoking is killing your finances in two ways.
First, it is expensive and second it increases the cost of your life insurance and may limit the coverages of your medical health plans.
If you smoke – quit!
If you are struggling, there are alternatives that do not cost so much.Vaping has become quite popular and is considerably less expensive.
Hubs has been a smoker for many years and has tried and failed many times to quit. Finally, he decided to try vaping he shopped around and conducted his research and settled on the option that best suited him and we are glad to report it is now 40 weeks since he quit.
Does Your Lifestyle Match Your Income?
So many people live beyond their means, for whatever number of reason’s unhappiness, trying to keep up with the Jones the list goes on.
The one lesson in this is the longer your lifestyle doesn’t match your income the less likely you are to have a lifestyle in the end. In the process of become debt free, we have made lifestyle changes, having friends over instead of eating out.
When we have family days out we pack a picnic.
Do You Pay With Cash Were Possible?
By paying using cash you not only reduce your banking and credit card fees but you are also more aware of your spending.
If I use the following example, your weekly food budget is $180, and your grocery list has been prepared. I would recommend leaving credit cards at home and just bring $180.
You will stick to your budget.
By using cash it does make you more aware of your spending, but it also teaches you to have good spending habits. I speak from experience on this matter.
We cut our banking fees in half, and we find it much easier to stick to our food budget, and most importantly it reduces the urge to impulse buy.
“Really the bottom line is when you start to look at the reasons you are still in debt, and you find a system that works for you, everything changes. Life becomes less stressful ultimately because you are working towards a better future.”
What changes have you made to get out of debt?
Related Content: How to organize your finances in 5 easy steps