Ways You Put Yourself In A Debt Trap Unknowingly!
How can you fall into debts?
You are wise and probably will be able to answer this question. No doubt in that! But do you know all the loopholes that can make you fall into debt traps?
Guess not! Coz, otherwise you’d not have been here, reading this post!
In this post we will discuss the various ways you can unknowingly fall into debts!
But first, tell me,
Do you believe “falling in debts” is a behavioral issue rather than being a crude financial problem?
If you believe so, then you are correct upto a great extent!
All that we do, represents our character and behavior! And everything is a result of what we do or think!
Seriously speaking, debt is a result of our personal habits.
If we are sensible, and know how to control our desires, wants and greed, then majority of our debt problems is solved!
Even many financial therapists have got to say that most of the times their clients who have debt issues also have some sort of mental or emotional disorders! Like some clients have a tendency to go for shopping to elevate their moods.
Some debtors eat out frequently to relieve stress, while in reality such habits only worsens the case!
Actually there are so many examples that can explain how you may unknowingly walk into debts! There’s a long connection between debts and emotional factors. In fact mental disorders are often associated with debts and haphazard financial decision making.
So, habits are really what you should pay attention to, and not blame low income and/or luck for unfavorable financial conditions in your life!
Here’s an explained list of various ways you can unknowingly fall into debts:
Buying unnecessary insurance policies:
This point might sound foolish, but in reality, excessive fear of misfortune and mishap, influences you to buy too many insurance policies, which in return blocks your cash vaults!
No wonder, a well maintained insurance policy is costly! You can’t deny that! Also you got to have yourself covered, and you can’t avoid that!
So be practical and wise, in buying the insurance policies that are only necessary! Too much of nothing is good!!
If you buy the minimal required policies, then you can free up a lot of cash, for using in other places! Maybe even for paying off debts, or some extra savings!
Getting lured by advertisements:
Every commercial, posters, digital ads, and promotions that you see, are meant to increase your spending!
The job of any advertisement is to make you feel that you need the material, which is being advertised! As soon as you see a commercial, you are tempted to buy whatever’s shown!
So take control of such enticements, and be sensible, and purchase only what you really need! Make a strong difference between your needs and wants!
Doing bad investments:
There’s a long history of people running into debts due to bad investment decisions! Even though some experts say that conventional investments are best, but at times alternative investment plans are also beneficial!
Since competition is high in traditional investment fields, it’s better to explore other options, where you can make profit and judge the market by doing low profile investments!
Having bad credit card behavior:
A big reason for running into debts is obviously credit cards! These cards have peaking interest rates, once you start to delay your payments!
Moreover, the reward and offer games these cards play are very tempting and easily instigate you to spend more.
So the expert’s suggestion is, you should know how to use credit cards wisely.
Use cards only when necessary and for emergency purposes. As with credit cards, you generally end up paying more for an object that you could have bought at it’s actual price, by paying in cash!
Making unethical secured debt decisions and spending too much on depreciating goods:
Secured debts are backed by assets that act as collaterals. Examples are mortgage, auto loans, and so on.
These debts should be purchased with proper precision. The old saying goes that buy a room as per your need.
If you buy a house that costs huge and you are unable to pay off your debt later, then you will be completely underwater. It is always advised to get a bit of financial counselling before making mortgage and real estate decisions.
And with auto loans, you should remember that vehicle price depreciates with time, unless you are going for a vintage car! So make minimum investments in such cases.
The same theory is also applicable to electronic goods! These are not assets, and should only be purchased based on your needs and not wants! Examples include cell phones, computers, tablets, etc.
If however, you have accumulated big debt amounts by using your credit cards too much or by taking out unsecured loans (including payday loans) for buying depreciating goods, then you can take help of debt consolidation programs. They can help to save money by reducing the interest rate on the amounts owed.
Debt consolidation will bring all your payments into one place and has the potential to offer you a single discounted interest rate for all your debts.
Competing among peer groups:
It’s really good to be social and have many friends. But competing with your friends regarding status and lifestyle standards is a very ill practice.
Doing so, will instigate you to spend more, and increases the chance of falling into debts. Also don’t entertain such behaviours in your friends too. Friendship is purely emotional, and not at all based on materialistic values. A true friend will value you both when you are rich and poor!
Discard such friendships that swing on money and status!
Getting into the vicious cycle of addiction and punk lifestyle:
Many university students and young adults get lost in the milky way of drugs, dopes, punk lifestyle, raw fashion, and other things not moral to mention!
Completely stay away from such activities, as they make you spend more, breaks your health which might land you into medical debts, and attach a social stigma to your name!
Say no to drugs and embrace a life of work and happy living!
Chasing dreams that can never come true:
Be practical and realistic buddy. You should definitely dream of big goals and achievements, but they should also be easy to establish!
It’s totally foolish to dream of things that you believe are only possible in your dreams! And is it even required to state that never use your precious financial resources to fund such impractical dreams?!
Having no track of expenditures and not doing budgeting or savings:
As financial advisors, we always say that your worth is estimated by how much you have saved and not by how much you earn!
Hence, your goal should be to increase your savings. You can do so if you can make a good budget and stick to it, by regulating your expenses.
With ample savings you can easily call backup, if you encounter sudden debts and/or financial loss!
Falling prey to the seven deadly sins:
Pride, greed, lust, envy, gluttony, wrath and sloth, are the seven deadly sins one can ever commit! Interestingly, these can also lead to debts.
Actions resulting from each type of the seven sins is not coming out of a healthy and sound mind!
Excessive pride increases your spending to keep up with your vanity. Greed obviously results in debts, and Lust is nothing different.
Envy helps you to spend more, as you want what others have. Gluttony means luxurious eating habits which can only be satiated by paying loads!
Wrath is anger, and people do many things in hot temper.
Finally it’s sloth, which means you are lazy, you do nothing, and want to get things done, which needs a lot of money!
That’s all I had to say about how you can unknowingly fall into debts. By understanding this post I can’t guarantee that you will be rich! But what I can guarantee is you won’t be poor, and will be able to live a healthy life henceforth!!