Changes to help you get out and Stay out of Debt

People in debt have many habits, some of them bad. Bad habits can easily contribute to you being in debt. If you don’t change these habits, you can easily find yourself back in debt before you know it despite all your hard effort to get out of debt. The following are five common bad habits you need to change before getting out of debt.

No budget

If you have never made a budget in your life, now is the time to start. It doesn’t have to be fancy or complex – a budget simply put is a guideline for you to follow for your income and spending. It helps you track money in and money out so that you don’t spend more money that you have coming in. The most important part of a budget is that you learn about your state of affairs – you know how much you earn, how much you can spend, and what your limit is for each category. This is a level of personal responsibility that many people in debt never achieve. Once you do, it is a kind of freedom!

Just make the minimum

Credit cards and other debts often have a minimum payment highlighted on their monthly statements. This is the amount you must pay to remain in good standing with the credit card company or other lender. Do not make the mistake of thinking payments of this size will pay off your debt any time soon. IF you don’t make any more purchase, and IF the interest rate stays the same, and IF you keep making minimum payments  you will usually pay off your debt in 10 years or more. For that whole time you are paying interest on your debt. If you pay your debt off faster with larger payments, you avoid paying all that interest – its money you keep. Before you get out of debt, get in the habit of paying off as much as possible on your credit cards each month, ideally pay it all off!

Impulse spending

Everyone is guilty of impulse buying at one time or another. For some people it’s a big new TV, and for others it’s a new pair of shoe or handbag. Impulse purchases can easily be your downfall where debt is concerned. You get instant gratification, and defer the cost for later. The problem with doing this often is that you become disconnected from the cost of your purchases, making it easy to run up large debt without realizing it. Two ways to limit your impulse buys are to not take your credit cards with you when you go shopping. This forces you to pay cash if you want to buy something, and avoid debt. The second way is to give yourself a budget for these purchases and enjoy spending it without going over.

No savings

People in debt often have little or no savings. Instead all their extra money goes to paying down debt. A better way is to establish some savings, even when paying down debt. You can then use this savings to avoid debt. Saving towards a goal helps you stay on track – no matter if it’s a trip to Florida, a new stereo, or just going to your favorite concert. Paying cash for all those things will help you stay out of debt, and avoid the costs it comes with.

Many credit cards

It is common for people to have five or more credit cards. The more credit cards you have, the harder it is to keep track of them. This will result in missed payments, big fees, and worse. Also you have to make five minimum payments Reduce your credit cards to one or two. Then you know the balance, and you can make bigger payments on them each month to help keep on top of your debt.

If you can make these five changes in your life before you get out of debt, you will find it much easier to stay out of debt. That means a happier life with more money in your pocket – something we all want!