Are You Addicted to Debt

Are you addicted to debt? I used to be.  I was a shopaholic. I could not go into a store without buying something - a pack of gum, candy, candles, a pair of socks, I had to buy something.  After some years I later realized I was trying to fill a void.  It can be difficult to realize that you are addicted to debt; many people ignore the signs or are in denial.  You have to identify the root cause of the problem which usually stems from childhood or a traumatic experience.   Once you admit you have a problem and examine the cause, and then you can begin eliminating the bad behavior. 

It is easy for Americans to get in debt because America was founded on debt.  During the American Revolutionary War debt grew to $75,463,476.52 by January 1, 1791. The American debt reached $1 billion in 1863. Between 1980 and 1990 the debt reached approximately $780 billion.  Debt surrounds us.  According to the Federal Reserve, the total household debt at the end of 2010 was approximately $13.4 trillion - which meant consumers owed almost as much debt as the federal government.  According to John Ulzheimer of Credit.com, more credit cards are issued in this country than another country, approximately 700 million.

People get into debt to fill a void in their life such as living paycheck to paycheck, loneliness, anger, poverty, overweight, sadness, depression, etc.  There are many kinds of debt addiction:  shopaholics, emotional spenders, compulsive spenders, gambling addiction, and more.  However, psychologists will disagree and state that being in debt is not an addiction.  I use the term “debt addiction” to highlight the problem with debt.  

If you constantly accumulate debt because you decide you won’t pay the bill, you don’t care about accumulating debt or you accumulate debt because of a negative situation that occurred such as getting laid off, being sick, or losing a loved one, you may be addicted to debt. Those addicted to debt don’t care about the consequences of their purchases, they are only concerned with the temporary instant gratification they feel when making a purchase.  Here are some signs that you are addicted to debt:

1. Do you go shopping with money already set aside to pay a bill?
2. Do you buy an item even if it is not in your size or buy items on sale that you will never use?
3. Is your home filled with unused items you purchased or items that still have the tags on them?
4. Do you pay your bills with a credit card, constantly pay late charges or spend extra money that could be used to pay a debt to buy something else?
5. Do you rationalize your poor spending habits by saying things like "I work hard I deserve it", " I can buy whatever I want", "I just had to have it", "I don't have to answer to you", "I want it now", or "I can buy it with my credit card"?
6. Do you buy items based on how you feel?
7. Do you transfer credit card balances?
8. Do you have a negative balance on your savings or checking account?
9. Do you live paycheck to paycheck?
10. Do you buy more than you need (home, car, clothes, boat, appliances)?
11. Do you have multiple credit cards which are all maxed out?
12. Do you take out payday loans or cash advances to pay your bills?
    

If you are addicted to debt here are some tips to help you.

1.  Being honest and admit there is a problem.

2. Speak to family and friends so they can offer moral support.
3. Contact a professional.
4. Surround yourself with at least 3 people who are in a better financial situation.
5. Pay your bills first.
6. Get a receipt each time you make a purchase and keep it.
7. Track spending.  Take all of your receipts from your credit card purchases and reconcile the receipts daily, weekly or monthly to see how you are spending your money.   
8. Avoid shopping when you are emotional. 
9. Go to the bank and take out the amount of cash you need for the week.  Once you spend that amount don’t get out any more money or use your credit card unless it is an emergency.

Are You a Selective Spender

                                                            

Do you spend $400 on an iPhone but say you don’t make enough money to save.  Did you buy a Lexus truck but complain about paying a parking ticket? Do you complain about paying for health insurance but spend $800 on a pair of Louboutin shoes? Did you buy a new $30,000 car instead of saving for a down payment for a house? If this sounds like you, you are a selective spender.  You spend money on frivolous items that have no value with no problem and complain about spending money on important items such as insurance, rent, mortgage, gas for your car or contributing to a savings account.

I am a selective spender too but I shop smart. I don’t pay full price for items and I don’t spend a lot of money on cars, electronics or food.  I also comparison shop on prices for everything I buy.  However, I don’t mind spending money on important things like homeowners insurance, car insurance, life insurance, health insurance, groceries (to cook at home), contributions to my savings and  retirement account and car maintenance to name a few.  It baffles me how many Americans spend $25,000 - $30,000 on a new car but complain about spending money to purchase health insurance or co-pays at a doctor’s office.  

The average cost of an iPhone can range from $200 - $800 for the phone plus additional fees for a voice plan, data plan and text messaging.  My car  was recently totaled and it amazed me how so many people offered car choices that cost $25,000 or more as if they were speaking about buying a new shirt.  So and so just buy car X and got a good deal for $25,000. I’m thinking, $25,000 I will never pay $25,000 for a car that will depreciate as soon as I sign the contract. A car that only takes me from one point to another that does not have diamonds and rubies or include a driver to take me where I want to go. 

According to the National Automobile Dealers Association, the average price of a new car sold in the United States is $28,400.  An automobile is a passenger vehicle designed for operation on ordinary roads that has 4 wheels and a gasoline or diesel internal-combustion engine. Automobile originated from the French meaning self-movable.  

If you purchase an automobile for $25,000 you are paying for an item used to move yourself from one point to the next over a 3- 6 year period depending on the length of your car loan.  It costs approximately $1,255 to manufacture an average family car and up to $2,475 for a luxury car or sports car which includes the labor costs and worker benefits or 8% the cost of the car.  

Last year, Americans spent $10.7 trillion shopping.  Americans spend more on transportation, housing, and health care than Canada, United Kingdom and Japan but we spend less on food, clothes and alcohol.

According to the Bureau of Labor Statistics Americans spend more money eating but spend less on cooking at home than Canada, Britain, or Japan.  Last year Americans spent more than 15% of their income on food, almost 17% of their income on transportation and 41% on housing.  In 2011, Americans spent $96 billion on beer, $4.14 billion on St. Patrick’s Day, $11 billion on coffee, $5 billion on ringtones, $18 billion on credit card late fees and $500 million on Twinkies. If they used 1% of the $5 billion spent on ringtones or $500,000 they could all become homeowners or business owners.  Are you a selective spender?