It’s easier than ever to get into debt. So many of us are lured into enticing offers like 0% interest for a year or travel perks like free nights at a hotel or access to airport lounges that it becomes difficult to use credit wisely.
If you’re one of those who have fallen into debt, you’re not alone. Luckily, there are strategies created to help you get out of debt now. But first, you’ll need to know what you’re up against, so start with this free debt snowball calculator to see the complete picture of where you stand.
Once you have the full idea, you’ll need to stop relying on bad habits that keep you from ever becoming debt-free. If you’re not sure what those habits could be, we’ve got six of the top reasons you can’t get out of debt below. Check them out.
1. You’re Spending More Than You Make
The easiest way to get into debt is by sending out more money than you bring in. The longer you do this, the more difficult it will be to change your spending habits.
To stop this habit, you’ve got two options: cut expenses or earn more money. You can cut costs by reducing unnecessary purchases, selling old stuff you don’t use, setting up a budget billing plan with your utility companies, or shopping around for a better deal on things like internet and cell phone services.
If you want to increase your income, you can start doing gig work like driving people around, running errands, or delivering food. You can also go online and work as a freelancer specializing in a specific role i.e. an editor, website coder, or virtual assistant.
2. You’re Not Tracking Your Finances
If you’re not sure how much you’re spending or where your money goes, you’ll never be able to plan for the future. Start by creating a simple spreadsheet that tracks every cent that leaves your bank account. Don’t feel ashamed or frustrated by your spending habits. Instead, look at it as data you can use to course correct and get out from under debt.
3. You’ve Got Too Many Cards
Before there were major credit cards, brick-and-mortar stores offered their own lines of credit, which was great for those who exclusively shopped at one or two stores. Today, though, it’s just not practical.
The more credit cards you’ve got, the more difficult it will be to get rid of debt. Not only will you have to keep track of more bills, but the pool of money you have available will have to go to more places, lowering your ability to make a dent in any single bill.
If you’ve got department store credit cards, cancel them now. That 25%-off deal you received when you opened the card has long since passed and is no longer serving you. Pay off the rest of whatever balance is left, then close the card and focus on keeping only a few cards (that you can effectively manage) open.
4. You’re Only Making Minimum Payments
The less money you throw at your debt, the further down the debt hole you’ll go. Making minimum payments on your balance extends the time it takes to pay off your debt by years, thanks to compound interest.
If you cannot afford to pay your balances off in full, at least pay more than the minimum amount due. Even $5 extra will help cut down the balance that can accrue interest and keep you in the cycle of debt.
5. You’re Too Impulsive
Have you ever received a package and couldn’t remember what you bought? Do you end up buying something solely because it’s on sale? If either of these is true, you might be an impulse shopper.
Impulsive spending will drive you into debt because your impulsivity removes the option for you to think critically about your purchases. Do you have the money to pay for this? Is this something you’ll actually use that brings value to your life? Removing these questions and just clicking “buy now” is a slippery slope that ends in a mountain of debt.
If you’re impulsive, take steps that make it more difficult to buy. Remove your stored payment methods on websites, put your credit cards in a locked box and put the key in another room, and only carry cash or prepaid debit cards with you when you go out. Doing any of these things will force you to take a moment to evaluate whether this purchase is worth the effort.
6. You’re Ashamed of Your Situation
Many will use credit to make it seem like they can live more lavishly than is accurate. If you’ve heard the phrase “keeping up with the Joneses,” then you know that insecurity with how we appear to others is commonplace throughout history. Now, thanks to social media, feeling the need to showcase your ability to live a life full of luxury has reached endemic levels.
If you’ve been lured into buying luxury items you don’t need just to fill a role or look, then take a step back and ask yourself: who cares? Is anyone really benefitting from you digging yourself into debt just to look a certain way or pretend that you live a certain life? Remember that both the “Joneses” and social media never show you the complete picture. You might just be trying to compete with something that doesn’t even exist.
The bottom line
Getting out of debt requires not only a plan but a lifestyle change that includes getting rid of the habits which brought you here in the first place. If you recognize any of the six reasons listed above, then use the tips we’ve listed to help stop the cycle and get out of debt now.