Debt can sneak up on you. Small, seemingly harmless habits add up over time. The longer that they go unchecked, the bigger the debt grows right under your nose. Eventually, you’ll look at your accounts and realize with panic that you owe much more than you can afford to repay. How could you have missed something so important?
It can happen to anyone. The best thing that you can do is keep a close eye on your finances and watch for the slippery slope into debt. Read ahead to see what innocent habits can quickly push you into debt so that you can break them.
1You Put Everything on Credit
Every time you shop for something, whether it’s a new piece of furniture or groceries for the weekend, you put it on your credit card. Doing this is one of the worst money habits you could have because it guarantees that your card’s balance will always be high and difficult to pay off. And if you can’t shave down the balance fast enough, interest will make it grow.
Try your best to reserve your credit card for situations where using debit or cash is either inconvenient or unavailable. Online shopping or paying bills are fine for the credit card. Trips to the grocery store or coffee shop aren’t.
If you’re having a lot of trouble getting a handle on your credit use, you should go to a licensed insolvency trustee firm and sign up for credit counseling services. Credit counseling will teach you better habits so that you can establish a more secure financial life and avoid slipping into debt without realizing it. A few sessions could change your life.
2You Only Pay the Minimum
Your credit card bill is due. You log into your online account, go to repay, and then enter the minimum amount — this is usually between $20.00 to $25.00. You do this every month to avoid paying a larger sum.
This is a risky financial habit that can quickly get out of hand. Paying the minimum is a simple way to avoid a late fee. So, if your budget is tight and you’re waiting for a paycheque to clear, you can still cover your credit card bill without worrying about penalties. Other than avoiding a slap on the wrist, paying the minimum does nothing for you.
It’s too small of repayment to whittle down your balance. When you have $1000 or more sitting on your card, what’s $20 per month going to do? It would take more than four years to pay off $1000.
Interest makes the habit even worse. The longer that you leave a high balance sitting on your card, the more it grows. By letting the interest collect, you’re forcing yourself to pay a lot more in the long run. Every month, you should try to pay off as much of the balance as you reasonably can. Using the smallest amount will stretch your monthly responsibility into a huge burden.
3You Forget Bill Payments
Bill deadlines slip your mind all of the time. This forgetful habit will do more than make you rack up late fees and penalties. If you do it enough times, you can lower your credit score — this makes it harder to apply for loans, rent apartments, and more.
To make sure that deadlines don’t go under your radar, you can use bill monitoring apps to send you reminders and prompts to pay before the date passes. It will be much more effective than scribbling a note on your calendar or putting a post-it-note on your refrigerator.
Another solution is to automate bill payments through your online bank account. That way, the money will be removed from your account — it can be your savings, chequing, or credit account — by the deadline every single month. That can take a lot of pressure off of you.
Be aware of this one consequence that comes with automating payments: it will backfire if you don’t have enough in your account. Meaning your payment will not go through, and you can receive penalties from your bank, along with your creditor.
4You Shop without a Plan
Careless shopping can ruin your monthly budget and slowly push you into debt. Every time you go to the grocery store, hardware store, or pharmacy, you need to have a plan. Otherwise, you’re just going to fill your basket will impulse buys — and you might even forget what you were supposed to pick up in the first place.
Don’t waste your time and money. Before you go shopping, make a list. It will help you get everything you need and stop you from overspending.
Here are some more ways to save money when you shop:
- Use couponing sites and apps to cut down the costs of your grocery bills.
- Look out for sales and discounts on flyers and store accounts.
- Buy non-perishable or shelf-stable items in bulk.
Shopping without a list or missing a bill one time won’t put you deep into debt. It’s making a habit of these simple mistakes that will slowly but surely get you into serious financial trouble. It’s a slippery slope. Break the habits now before it’s too late!