Debt can feel like an insurmountable mountain, but it doesn’t have to be. While life circumstances often play a role in creating debt, certain habits can worsen debt-related situations.
Understanding and adjusting the following habits can be a powerful step toward financial health. These common habits that can exacerbate debt are particularly worthy of attention for many Americans.
Ignoring debt payments
One of the most common mistakes is simply ignoring debt. Avoiding financial responsibilities might provide temporary relief but quickly lead to a vicious cycle because:
- Interest builds
- Fees accumulate
- Creditors become more aggressive in their collection efforts
As this happens, an individual’s credit score is likely to drop, and accessing new forms of credit or loans becomes increasingly difficult.
Individuals can break this habit by setting a schedule for paying bills and prioritizing debt payments, even if it’s only the minimum amount initially. Automating debt payments can help ensure individuals don’t miss due dates.
Overspending without a budget
Without a budget, losing track of expenses is easy, leading to overspending. A budget is a financial map that provides insight into where money is going and allows individuals to allocate funds to debt repayment. Overspending can lead to relying on credit cards to cover expenses, which can trap individuals in a debt cycle.
Individuals struggling with insurmountable debt can start by creating a realistic budget that factors in:
- Income
- Expenses
- Savings goals
It’s also important to list monthly essentials like:
- Rent
- Groceries
- Utilities
- Debt payments
This process helps identify areas where to cut back on discretionary spending and allocate more funds to debt repayment.
Using credit to fund lifestyle upgrades
It’s common to want to improve one’s lifestyle—whether it’s:
- Upgrading to the latest phone
- Taking vacations
- Buying a new car
But funding these upgrades with credit creates more debt, often at high interest rates. Over time, using credit this way can lock individuals in a debt cycle that’s difficult to escape. Individuals can break this habit by practicing delayed gratification.
Debt doesn’t have to control an individual’s life, but poorly-informed habits can make it a long-term burden. With all of this said, replacing these habits with responsible financial practices might still not be enough to free individuals from insurmountable debt. This is when it can help to seek legal guidance and explore approaches that will allow individuals to regain control of their financial future.
