One of the obvious reasons why you are in debt is because you had been spending more than what you are currently earning. As you keep on putting yourself in debt, your limited resources will have to be shared with both basic expenses and your debt payments. If you do not curb your overspending habits, you may end up growing your debt even further. That could lead to the growth of your debt payments and it might compromise what should have been spent on your basic needs.
You need to do something about your buying habits if you want to avert a financial disaster. Even if you are already in a financial crisis, correcting your spending habits will get you out of the rut that you are in. We are all unaware of it but we are all compulsive buyers. Most of us have the mild case while others have a more severe problem with impulsive buying. These impulse buying practices include grabbing that magazine because it has your favorite celebrity in the cover. Or it can be buying a dress because it is on sale – not because you need it for an upcoming event.
What causes impulsive buying habits
The thing about impulsive buying is you do it naturally. For some people, they do it without really thinking about it. Well that really is the problem. You need to think about every little purchase to make sure that you are not overspending. The important point here is this – if you are doing something on an impulse, it means that act is being influenced by a strong mindset or belief that you have to correct. We can call it the financial lies that consumerism instilled into what we believe is the norm. You cannot correct your buying habits if you do not understand what is influencing your financial decisions. Here are some of the financial mentalities that we have discovered can cause compulsive buying habits.
Using credit cards regularly. The convenience of credit cards is the fact that it can help you purchase things or avail of services even when you cannot afford to pay it in cash now. The whole idea is to “shop now and pay later.” That is a mentality that you have to correct because it will lead you into debt – especially when you are putting yourself in debt to buy products that lose value over time. That is not really a good investment. Learn how to use your credit cards properly so you can benefit from the good credit report that it can give you without really putting yourself under too much debt.
Basing purchases on what you can afford, not what you need. Lenders will tell you how much you can afford to buy in terms of a car or a home. However, you should not always base your buying decision on that figure. Even if you can afford to buy a million dollar home, you should not put yourself under that much loan. Decide on what you really need in a house (in terms of size and specifications) and that is what you should buy. Remember that big is not always better. A big home entails more expensive upkeep. If you want to get the full loan, it may be smarter to buy two homes – one to be used as your residence and the other to provide you with rental income.
Not putting too much thought or effort to save. Some people do not save for retirement until it is too late. You have to consider the fact that the longer you wait, the more monthly contributions you have to make. You do not know what expenses you will be facing in the future. Having said that, you need to start saving as early as you can. And not only that, you should put aside money for emergency situations too. You may be living within your means but when the furnace breaks or the car needs a new transmission, where will you get the money for that? It could lead to unnecessary debt that could have been prevented if you only had money put aside.
How to curb bad spending practices
Once you know the mentalities that led you into so much debt, then you can take more active steps to cure your bad spending habits.
If you are really addicted to shopping, you may want to get professional help – in the same way that an alcoholic needs help with their addiction. Debtor’s Anonymous is one place to start. You attend gatherings wherein people with similar spending problems as you will try to help each other get over the bad buying habits. If the compulsive buying is too strong to battle on your own, that can really help you to overcome it. The great thing about it is you can talk to people who are going through the same struggles. You can help each other battle your inner urges so you can all live debt free lives.
But if you think that you only have a mild case of compulsive buying and you think that you can correct the practices on your own, then here are some tips that you may want to follow.
Start using a budget. This simply helps you identify where your money goes to every month. You will have an idea as to how much you are earning and how much of it can be spent on the various categories in your expense list. If you have no idea how to do it, National Debt Relief has a budget planner worksheet that you can download for free.
Limit your credit card use. If you can manage it, cut off all your credit cards except for one. Best to eliminate the source of temptation to spend more than what you can afford.
Buy most items in cash. It is always better to adapt a cash only policy. If you run out of cash, you stop spending. If you have a credit card, limiting your spending will be more difficult.
Practice smart spending. Always think about where you are putting your money. Before you shop, make a list of what you need and stick to that. This is a direct approach in curbing your impulsive buying habits. If it is not on the list, do not buy it.
Be wary of spending on sale events. If you buy something that you do not need, it is a waste of money – even when it is on sale.
Learn from the mistakes of the past and correct them to avoid putting yourself in a compromised position in the future.