Being in debt is no fun at all. There is absolutely nothing fun about giving up you money for things that you might not even have anymore. Delayed gratification is looking pretty good now, isn’t it?
The only thing worse than getting into debt is staying in it for a long period of time, keeping yourself a slave to the lender and paying hundreds or thousands (or maybe even hundreds of thousands!) of dollars in interest. To avoid as much of this interest as possible, let’s talk about the habits that are keeping you in debt.
1. You are spending more than you earn.
Duh, right? Unfortunately, in today’s debt-ridden society, many people are spending more than they make on nonessentials. If you make less than you spend, you are not only not paying down any debt, you are incurring more! Stop doing that!
2. You are spending EXACTLY what you earn.
You will never be out of debt if you are spending all of your money. There are almost always places where you cut expenses (unless you are in survival mode, of course) and you should be allocating that money to debt. I’m not a hard ass who thinks that you can’t enjoy your life at all until you are out of debt, but you need to be making progress. Truth: minimum payments do not count as progress.
Related: 6 Steps to Get Out of Debt
While this may seem obvious, you must live below your means in order to get out of debt and build wealth. I have yet to meet anyone who thinks living paycheck to paycheck is super awesome and totally not stressful. Spend less than you earn to pay down debt and keep the worry wrinkles at bay.
3. You don’t have an emergency fund.
Unless you are emergency-proof (spoiler alert: you aren’t!), you need, need, need an emergency fund. NEED. Because a rainy day will come, just like your grandma said, and you will have to go into debt AGAIN to deal with it. No bueno.
There is not a magic number for the perfect amount to have saved in an emergency fund. Different people say different things but honestly it will be different for any given situation. I would suggest $1,000 at a minimum. More if your job is unstable and/or you are risk averse. A good rule of thumb is have enough to cover your non-medical deductibles and plane tickets home if you live far away from family.
4. You are continuing to use credit.
Paying down one debt while running up another does not count as progress. If you are going to commit to paying off your debt, stop using credit! As with anything else, there is an exception. For those of you that have PROVED that you can use credit cards only for the rewards, you can continue to do so. Those with massive amounts of credit card debt need not apply.
5. You are trying to be too hardcore.
I completely understand the draw to hit your debt hard, but moderation is key. You are not going to magically transform from a spendaholic to a tight fisted miser overnight. Think of extreme budgeting like yo-yo dieting — it’s very much a cycle of deprivation, gluttony, deprivation, gluttony. Often times, you will end up rebelling against yourself and overspending during periods of “gluttony”.
Paying off your debt is important, but don’t buy into yo-yo debting. Allow yourself small splurges to keep yourself on track and avoid binge shopping your way into more debt.
6. You refuse to break out of your routine.
Pro tip: If you purchase anything habitually, it’s probably costing you more money than you realize. This is called the “latte factor” which I’m not a huge fan of but it’s still something to consider. These things can range from little routines, like the daily coffee or cheap lunch out, to the bigger more serious routines, like smoking or excessive drinking. These larger habits will not only cost you on a daily basis but can potentially cost you thousands of dollars in healthcare down the line. End of PSA.
Anyways, the money you are spending on habits can be reallocated to debt if you give them up. Try brewing coffee at home most days, packing lunch a few days a week, and/or kicking your expensive (and often unhealthy) habits! Take that savings and throw it at your personal debt monster.
7. You are not prioritizing it.
Look, I totally understand loving travel and shoes. And you are welcome to pay for both as it is your money. But if your mouth is saying that paying off debt is your priority and your bank statements are saying otherwise, there is a bit of a disconnect here. Prioritize debt or prioritize something else, but don’t complain that your debt isn’t going away when you aren’t truly focusing on it.
Related: 5 Debt Traps and How to Avoid Them
8. You are planning more than you are doing.
When I first started working on paying off my debt, I spent a lot of time planning my debt payoff and not much time making measurable changes in my spending behavior to free up money to actually pay off said debt. Fixating on the process instead of carrying out the process won’t get you anywhere. Create a game plan and then actually follow it. Unless there is a glaring issue with your plan, stick with it for a minimum of six months. Remember: your process rarely matters that much as long as progress is being made.
Ditch these 8 bad habits to get out of debt! Deprivation (modest deprivation, of course) sucks now but debt freedom will be so worth it. Good luck!
What bad habits are keeping you in debt? Do you think living paycheck to paycheck is the cat’s pajamas?