Sunday, September 08, 2013

What to do when your spending habits become a problem

Last year, consumers spent $10.7 trillion shopping. With that much money, you could buy over 2000 aircraft carriers, 300 private islands, and still have money left over for a latte. Most consumers have had or currently have at least one bad spending habit. Bad spending habits are just that habits and habits can be broken. 

Debt used to be a bad word and being in debt used to be a bad thing.  Unfortunately the credit card and banking industries made it so easy for consumers to get credit cards that they people got caught up in buying and forgot about how they were going to pay back that debt.  This also made it difficult to think about buying in terms of needs vs. wants.  Since credit is so easy to use many consumers who deprived themselves of their wants were now able to buy as many wants as they liked.    

Spending habits are usually inherited from parents or family members.  If you were not taught how to manage your money while growing up or did not see good example of money managing, chances are you will have bad credit at least once in your Iifetime.  If you don't much money left over after you get paid this is an indication that you spending habits have become a problem. Everyone should reduce spending no matter what your situation to ensure you live well below your means so that if a financial crisis occurs you can overcome it without having to make drastic changes.

It is better to reduce spending because it is much easier to scale back by making small adjustments to your life than to make drastic changes.  You don't have to sacrifice quality just because you reduced spending. Your spending habits may become a problem if you:

  1. Buy things you don't need
  2. Spend money you can’t pay back
  3. Bounce checks or pay overdraft fees, late fees or other fees
  4. Don’t track your spending (no spending plan or budget)
  5. Don't have a saving or retirement account
  6. Don't have health, life or disability insurance
  7. Live paycheck to paycheck
  8. Have creditors calling your house day and night or sending harassing letters
  9. Have credit cards that are maxed out
  10. Unable to buy or pay for basic necessities
  11. Use risky financial products such as:  payday loans, cash advances, retirement loans, home equity loans, etc. to pay bills or debt
  12. Borrow money to pay your bills
  13. Avoid phone calls from creditors
  14. Bounce checks or have overdrawn bank accounts
  15. Bad credit

Here are 13 ways to stop your spending habits from becoming a problem.
  1. Pay bills online or setup automatic paycheck deduction
  2. Create a spending plan or budget
  3. Setup email or text alerts for your bank accounts
  4. Downsize or downgrade your lifestyle
  5. Earn extra income
  6. Reduce spending by 30-50%
  7. Adjust your W-4 instead of getting a huge tax refund at the end of the year
  8. Stop charging and pay for items with cash
  9. Get current on late accounts – setup payment plans to pay down debt
  10. Go on a spending fast for 14, 21 or 30 days
  11. Join support groups to help people who have trouble managing their money
  12. Sign up for financial tips from free newsletters or websites
  13. Save money

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