Below are a list of bad habits that involve debt. These should be avoided at all costs. Debt costs money (interest), so why make it worse more with fees!
Hopefully, none of these fit your situation but please consider changing your habits if any of these resonate with you.
Using “Balance Transfers”
These are the offers you get in the mail from credit card companies. They offer you the option to transfer a balance from another card or use a check provided by them to pay a bill or even deposit into your checking account.
The catch in the fine print is that they charge you a fee for this privilege (usually between 3-5%). This works out great for them as they make an up front fee and usually make more interest because the majority of people don’t payoff their balances before the reduced rate (sometimes 0%) expires.
Oh, and the rate is always higher for these types of charges. These are essentially a trap, so stay away! These companies only offer this because they make money from it!
Failing to Let Creditors Know You are Having Financial Hardships
Okay, if you are struggling to pay your bills, you have to let your creditors know! This can sometimes help you out in the long run, especially with student loans.
For example, if you are a recent college graduate and don’t make enough to pay your student loans and have living expenses you may qualify to put your loans on hardship deferral until you can increase your income or on a graduated repayment plan.
However, you will still accrue interest during this time.
Having No System or Strategy for Paying Off Your Debt Bills
Do you have any organization when paying your bills? Having a little organization here can make your life and paying bills much less stressful.
My husband and I tend to pay all of our bills at the beginning of the month, with the exception of the ones that vary from month to month.
I know this is not something you can just start doing (we didn’t) but if you take the time and make the effort to save up one month’s expenses it will increase your quality of life because you won’t be stressed about not having chosen to pay the electric bill or buy groceries.
YNAB is a great program to help move you in that direction.
Using Credit Cards
This is a big one! If you ever carry a balance on your credit card you might as well cut them up and use cash or a debit card. Many people use credit cards for convenience and for the rewards that they earn.
We use 1 credit card for our expenses and we NEVER carry a balance. We didn’t do this until we could stick to a budget and learned self-discipline.
Thinking That Being on a Budget Means You Can’t Spend Money
This is a big one. Most people don’t live on a budget. They spend most, if not all, of their paychecks before they get the next one.
Most are just intimidated by a budget and don’t want to ask for help because they don’t want someone else to know about their finances or are. A budget is you telling your money where to go, rather than wondering where it went.