Beware of These Major Causes of Debt
Recall our previous post How to Devise a Debt Payoff Strategy. As much as the approaches outlined in this article can help you climb out of debt, there are still habits to be aware of that counteract these strategies. Take a look below at three of the most common causes of debt. Recognizing these faults is a major step in overcoming debt and establishing healthy credit.
#1: Planning to Plan Ahead
If you are always telling yourself “next month,” you may fall into a vicious pattern of procrastination. Sometimes you have to jump into a new savings regime in order to successfully tackle debt — waiting for the perfect time rarely ever pays off.
Without concrete plans in place, you’ll continue to sink into debt, making the eventual process of repayment even longer. Discipline is the most important character trait for paying-off debt, which is why a lack of disciple is among the largest causes of debt today.
#2: Do You Accept Credit?
Always charging your credit card is dangerous. Once it becomes habitual, it’s very hard to stop. We’ve talked about the differences between recurring and installment debt, so it’s now time to curb the habit of relying on plastics to get through the day-to-day.
When shopping becomes recreational, however, things can spiral out of control. Even if you are gathering a variety of installment debts, too much of a good thing often becomes bad. Taking a step back before using your credit card forces you reflect on the transaction. Doing so will help you determine whether or not the purchase at hand is wise.
#3: Maintaining Appearances
Despite the benefits of financing a used car, people are sometimes reluctant because they have a false notion of appearances. Perhaps, a neighbour purchased a brand new vehicle or moved into a bigger house — it is this sense of competition that pushes people away from the smarter investment. Ask yourself: is it really worth racking up debt to keep up appearances?
A major cause of debt also results from changes in the economy. After growing accustomed to certain luxuries, living without them can be difficult. Lifestyle and debt are sometimes two of the same. But like the automobile example above, sacrifices to save money do not have to be drastic. Used cars are just as reliable and ascetically appealing, which is why it’s important to think about value and long-term outcomes, not just appearances, when it comes to making a purchase.