3 ways to maintain positive debt habits after a bad debt situation
Debt problems can occur without much warning and can quickly derail our finances, causing credit and cash flow issues galore. While we may do our best to keep debt free, this is not always the case. Typically some debt is commonplace for many – having a lot of debt however, can be very, very problematic. So what do you do, when you find yourself swimming in bad debt?
There are certain steps you can take you get yourself out of this situation – and these include many positive debt habits that you can acquire, in order to keep yourself on top of your debt, instead of under it. Additionally, by learning from your previous financial mistakes you will be able to prevent a bad debt situation like this from repeating itself.
1) Identifying the Cause of Debt Problems & Re-examining your Budget
It is first important to identify the cause of your debt. Again, while you may have various debts, there will likely be some that are the most damaging to you at the time. Your biggest debt, your high-interest debt – whichever debt is too much for you to handle will be the one you may identify as the problem and the cause. Within that debt area, you may see where you went from. Did you overspend, take on more credit than you can handle? What mis-steps lead to this position?
Taking a closer look at your budget (if you have one) – again, ask yourself, where did you do wrong in your original spending/saving plan? Re-examining your budget may also give you insight into where and when your debts began to grow more rapidly and is vital information if you are to devise a plan to reverse the situation as soon as possible.
2) Designing a Realistic Budget & Tracking Your Spending
Secondly, you should look at making a realistic budget that is within your spending limits for each of your expenses. When you have pinpointed what you can realistically spend – you will also have identified the amount you may have left to save or pay off your debt.
After you have re-designed your new budget, being sure to include all of your expenses, you will want to continue to track your spending every day. Keeping on top of your daily spending can help you account for every dollar – and not spend beyond your current means. Not going a day without watching where you are spending your money – and how much is also extremely important so that you don’t slip back into bad spending habits.
3) Learning How to be a Smarter Shopper – Eliminate Emotional Shopping
There is one habit that frequently contributes to debt, and this is often referred to as ‘emotional shopping’. With that being said, you should look to eliminate or reduce any emotional shopping you may do as it has likely also been wrecking havoc on your finances. Part of being a smarter shopper can include utilizing many positive behaviours that help you avoid instances of overspending and ultimately emotionally-driven shopping.
As a part of your budget, you will have expenses that may include groceries, clothing, and other household costs. In order to avoid overspending or impulse buys, when you do go shopping, you should prepare a list before you leave the house. Sticking to this list can help eliminate any unnecessary purchases and can add to your overall shopping efficiency. Additionally, if you also prepare a shopping schedule to stick to with the stores and items you need, then you are also less likely to gravitate towards stores that will only help fuel your retail therapy needs.
Lastly, if you know which triggers may lead you to be more prone to being an emotional shopper – you can try to remove yourself from these type of scenario. For example, whether shopping alone or shopping in a group makes you more susceptible to overspending – try and avoid getting into these situations as much as possible.
If you are shopping alone or with friends and fear you may spend too much and buys items you don’t need, you can also opt to leave your credit card at home. In the instance that you go to pull your card out to buy something yet find you don’t have it on you – this will quickly put an end to any impulse shopping. If you only spend the cash you have on you – you can turn this type of shopping behaviour into a positive habit over time – saving yourself from overextending your credit and leading to more debt.
Identifying the specific emotions that may also be the cause of your over-spending or emotional shopping tendencies can also provide insight into how you can avoid getting more into debt. Should you feel these certain emotions coming on, you can acknowledge the situation and instead look to alternative activities that can help banish these negative emotions from your system. Some alternative activities that may help you could include, exercise, listening to or playing music, reading a book – many of which will not involve having to open up your wallet and spend more of your hard-earned money.
Learning where we’ve gone wrong in the past can certainly help influence us as we move forward with our financial management. If you can first, identify the cause, then set a new and realistic budget, followed by continuing to shop in a smarter, more organized manner, you can set yourself up for success in the future – as well as preventing a re-occurrence of debt that reaches this magnitude ever again.