Once a habit is created, it can be very difficult to break. Has your financial situation become a vicious cycle of debt and spending? Consider the following 5 bad money habits you need to break today to regain financial freedom:
1. Spending more than you earn
According to research from the National Financial Capability Study, one in five Americans spend more than they earn and 38 percent break even. The difference between those who struggle with debt continuously and those who stay in control of their finances is spending more than they can afford. Living an excessive lifestyle because they want to live a certain way they really can’t afford. If you are constantly tempted to buy the next big thing (new house, vacation, car, increase living expenses), it’s time to rein in the problematic spending so you can maintain (or repair) your financial freedom.
2. Setting your bills to the side
More than one-third of your credit score is based off your payment history. How quickly do you pay your car insurance and power bill? Do you pay your credit cards on time? If a collections agency calls you, make sure you pay the bill right away. It is critical that you create a payment plan with your creditor before it goes to collections. If you are struggling with bad credit issues already, paying your bills on time from here on out is key to rebuilding your credit score.
3. Only paying the monthly minimum
If you are currently only paying the minimum every month, it is time to sit down and take a closer look. In reality, making minimum payments is often calculated to be about 4-6% of your balance. You are not only staying in debt, but you are also accruing more interest. When you open your next bill, make sure you are paying enough that you are covering the balance and helping yourself get out of debt.
4. Failing to plan for debt
I’ll just keep throwing money at my debt, and it will disappear eventually…right? Assuming going into debt is normal is a slippery slope. It will quickly leave you overwhelmed with multiple creditors calling and asking for payment at the same time. The key to regaining your getting your debt under control is to create a budget and a plan. You need a budget to see how much you can throw at your debt each month, and a plan to ensure those balances continue to decrease until the account is closed.
5. Going on mood-based spending sprees
Paying off your debt is like sticking – or failing to stick with – a diet. It is only successful if you trust the process and make small, consistent changes on a daily basis. While it may not feel like a lot on any given day, those efforts add up over time. This is what leads to success. If you get frustrated one day, throw your hands in the air and completely fall off your diet for a week, it will seriously hurt your progress. The same goes for debt. If you repeatedly go on shopping sprees when your stressed and overwhelmed, your progress throughout the week to be frugal will be devastated.
Has bad credit begun to affect more than just your personal life? A bad credit score can make it incredibly difficult to secure the services you need to run a successful business. As you work hard to change your money habits for the better, don’t forget to consider alternative business funding options like bad credit merchant account instant approval. First American Merchant has years of experience in helping businesses secure funds and payment processing services quickly – in as little as 24 hours.
If you would like to learn more or get the process started, contact our team of experts today.