10 beliefs that keep you in a debt cycle
1. I deserve this
We all like to treat ourselves, and society can be very demanding on us. Whilst it’s good to give ourselves a pat on the back now and again, regular spontaneous purchases can be dangerous if not budgeted for. You can overcome this habit by allocating a small budget towards treating yourself each month. Look at finding other ways to treat yourself that don’t result in spending money. After all, the best things in life are free.
2. Sales are a good excuse to spend
Who doesn’t like the feeling of getting a good deal? It’s very tempting when you see an offer like “40% off!” or “All items must go”. A sale is not a good excuse to spend, as it causes many of us to ‘impulse’ buy, which results in you spending more than you originally planned. If you didn’t plan on buying it in the first place, then don’t buy it. How to overcome this belief – consider unsubscribing to promotional offers online, such as emails that entice you with sales. Only buy what you need, and what you’ve budgeted for.
3. Student loan debt is OK
Often considered as “good debt” due to the relatively low interest these loans carry, and the purpose of an investment in your future. However, thinking along these lines can hinder any plan of action to pay them off within a reasonable timeframe. One way to inflict a reality check is to figure out how much money is going toward interest each day. This can be a huge wake-up call, and if you run a simple calculation based on the terms of the loan, it will provide the sum total of the daily interest being paid.
Interest rate X current principal balance / by the number of days in the year = daily interest.
4. You only live once
Adopting the YOLO (you only live once) ideology is the perfect excuse to spend money recklessly. You can’t take money to your grave, so why not enjoy life now? However, this mindset can get you in a lot of financial bothers. In order to get out of debt, you should have a plan in place, which will probably mean cutting back on some of life’s little luxuries. Refrain from spending on anything you like and allocate some of that cash towards paying off your debts instead.
5. Buy now pay later
Having the option of a credit card makes it easier to buy now and pay later, which results in overspending and buying whatever you like at that very moment. You may think “I don’t have to worry about this now”, but when that credit card bill arrives, some other unforeseen emergency expense might come up. There are a few ways to overcome this habit, try to only buy things if you have the money in your account. If you are in credit card debt, consider going on a ‘cash diet’, where you only use cash for a certain amount of time. Leave the credit cards at home, if they’re not on you, you’re not spending on them.
6. I’ll figure this out later
Getting into debt isn’t difficult, but getting out is. It requires sacrifices and above all discipline. You have to look at the hard numbers and the facts as debt is very binary. Start with your income and then your expenses, and then look at your outstanding balances and interest rates. Life can be hectic and busy, but postponing your debt repayments will delay you in reaching your financial goals. Always try and check your current account balance daily, this will provide a good refresher to what’s coming in and out of your account, so you are more aware of just how much money is being spent. Look at your schedule and figure out a payment plan based on your spending habits.
7. Everybody has debt
Whilst the majority of Australians are in some form of debt, the reality is that not everybody is in debt, and it’s way cooler to be in that minority. You should strive to get out of debt, and once achieved stay debt free if possible. Try telling yourself that you want to be debt free and take crucial steps each day to get there. It could be paying off more than just the basic minimum repayments on your credit card or personal loan. Picture yourself debt free and how this will make you feel. It’s a far greater feeling seeing that debt balance drop.
8. Next month will be better
It’s all about having the right psychology. Far too often people use the excuse of “this month wasn’t a good time” but next month will be”. Once you squander your budget, it’s easy to continue to spend because you’ve already screwed up and made a promise that next month will be better. Too many people believe that when we’re in our 20s and 30s, there’s a consensus that we have plenty of time to build a framework for financial stability and life goals. The problem is, if you don’t change the behaviour of your actions, you can end up in the same trap and continue to live beyond your means in the years to come.
9. I need to keep up
With the pressures of social media, it’s easy to look at the material things that others possess. Trying to keep up with others can lead to overspending which keeps you in debt. Many people feel the need to keep up and fit in, whether it’s fancy holidays or the latest gadgets. Not everybody can afford the latest and greatest, so don’t worry about what others are doing, for all you know they could be in a world of debt themselves. Run your own race and assess your needs versus wants, and look at the things you already have before spending.
10. It’s all good
Managing money can actually be very rewarding. It’s more about your mindset and changing your ways. It’s tough to break those habits, but try to research ahead of time the associated costs and budget any time you make a purchase on credit. It’s not going to be easy, however, it is possible over time and you will notice yourself making better financial decisions in the long run.
