Once we realize we’re in a debt spiral, we need to figure out how and where we’re spending our money and what adjustments can be made to stop the madness. This is where we need to be creative and/or make some tough choices (or sacrifices). Bring coffee from home or use the coffee maker at the office. Bring lunch from home, prepare food at home for dinner more often. Try a “stay-cation” by exploring and finding great places to visit near home. When we get the itch to get back on a motorcycle again, get that snowmobile, boat or jet-ski we’ve been wanting, we need to make a plan to put money aside until we have enough to buy it outright. When it comes to avoiding unnecessary debt, the best rule of thumb is and always will be…if we can’t pay for it in cash (or pay the bill in full when it comes) then we shouldn’t be buying it at all! I understand it’s always easier said than done, but if we’re serious about our financial well-being and getting our financial house in order, then we need to get serious about our spending habits.
What are You Spending Your Money On?
When the amount of your bills is greater than your income, it’s safe to say…you’re in trouble! The very simple concept of having more money going out than you have money coming in doesn’t take much to figure out. It’s when you find yourself in situations like this that you’ll only keep adding to your debt whenever you spend more money than you make. The moment you realize that you’re whipping outthe credit card to pay for a cup of coffee…or two…or three (throughout the day) with that bagel or egg sandwich. Or grab a bite to eat for lunch every day at the nearby restaurant or deli. Or order take out for dinner every night (or almost every night), or…heck, you don’t have the cash on you right now so you’ll just pay for it when you get the bill next month! That’s when you should realize that you need to get your spending under control.
It’s those frequent, everyday small purchases which cause you to “nickel and dime” yourself into that never-ending cycle of debt. You not only need to get your spending under control, but you also have to avoid unnecessary debt! Don’t let those small purchases add up until you realize at the end of the month you can’t pay it all back. If you don’t have the cash to pay for it, then you shouldn’t be buying it and you probably don’t need it. And if it’s something you do need, then you need to re-assess your budget or come up with a plan to save up for it! Under normal circumstances, the only time you should be purchasing anything with credit cards is if you have the funds available to pay for it and its use is strictly out of convenience. Use it as a tool, but not as a means to support a lifestyle you can’t afford. You’ll never reach financial freedom by continually getting yourself into debt that could be and should be avoided.
“Pull in your belt, spend less, and reduce debt.” – Ray Dalio
Not only do you have those small, unsuspecting ways you get yourself into trouble with debt that slowly and incrementally build up until you eventually find yourself in over your head. But then there’s those big dollar purchases that you need to become aware of also. Those are the ones that should be more avoidable, because you generally see them coming. Like that brand-new motorcycle, snowmobile, boat or jet-ski you just have to have or the extravagant, exotic vacation destinations, or that giant flat screen TV with the upgraded surround-sound system. The kind of stuff that you don’t really have the money for…but that’s okay, just buy it on credit! And why not?! Everyone else does it! Everyone else has that cool stuff!
Now…don’t get me wrong, those things are nice to have and they make you feel good. That is until the bill shows up every month and you have to figure out what’s going to get paid first and when! This goes back to distinguishing between your needs and wants and the feeling of instantaneous gratification for having what you want NOW and worrying about paying for it later. But why even put yourself in a position to have to worry about it later, when with some adjustments and a little sacrifice now, you could avoid any worry at all. Yes! It takes planning and patience, but it will be worth not dealing with the stress of paying back debt and it will make the enjoyment of having those things even more pleasurable.
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