10 Habits That Can Land You in Really Bad Debt

spending more than you earn can lead to bad debt

Mistakes are not exactly enjoyable, especially when they lead to bad debt, but that doesn’t mean there isn’t a silver lining to be found. We often lament that if we knew then what we know now, if we could it all over again, if we just done this instead of that; and it always leads to further regret. The simple truth is that the past is in the past and it cannot be changed. It simply does not matter what we do, the past is the past.

I like to tell my kids and my husband to make like Elsa and let it go. You might not love it, but what’s done is done, and every mistake makes for an invaluable lesson. In fact, I like to let my kids make their own mistakes simply because while I could easily help them avoid making mistakes and wasting time, they’re never going to learn anything unless they live it. So while we make bad choices from time to time, we also have the opportunity to make good choices from that point forward. We look at our mistakes, we ask ourselves what we can learn from those mistakes, and we move on.

If you’ve had debt in the past, have it now or you want to avoid it, you have to stop making some very common mistakes. It seems so easy to say “don’t,” or “do,” but it’s not always and that’s why we’re here to provide you with a list of reminders to help you in the future. Maybe you’ve made these mistakes in the past, but your experience and our reminder serve to help you avoid making them again in the future. Keep yourself out of debt by avoiding the following financial mistakes.

Not insuring yourself and your family

It never fails to amaze me how many people are shocked that I have a life insurance policy on myself. After all, most of the people in my life don’t understand that I actually work from home (because you can tell them this and they assume that means you just lie by the pool all day long) and that I’m a stay-at-home mom. However, even if I was a SAHM, I’d need insurance. See, my husband, if anything ever happened to me, would have to find care for our children – that would add an expense to his income. He’d have to pay for far more than he does now since I’m home with them, and that is a financial burden. All people who contribute anything at all to the household need insurance to avoid debt.

Not creating a budget

Without a budget, even if you don’t live on a tight income, I don’t see how people keep track of things and feel at all organized or on top of their financial game. I need to see dates, times, amounts and everything in between or I feel lost and overwhelmed. It’s also a great way to keep in mind what you bring in and what you put out so you always know how much disposable income you have – that’s what keeps you out of debt.

Using home equity as income

So your home is worth more than you owe and you took out a home equity line of credit so that you could do some work around the house. That’s amazing; and good for you. Now, don’t use that line of credit as an ATM or you’re doing to end up in debt like you would not believe.

Co-Signing loans

Don’t. Do. It. It’s a terrible idea. It’s the worst idea. You have no idea how bad this could be for you if the person who swore their trustworthiness and ability to pay something back decides that this is just not possible. I mean, seriously. You could ruin your finances and end up in debt that’s not even yours.

Not checking your credit report

Mistakes happen, people are horrible and steal your identity; you have to check these things regularly. Do it; it’s so simple to obtain a copy of your report that I do not understand why people don’t do this more often. This is one of the simplest ways to keep yourself out of debt and out of financial ruin.

Not saving for retirement

I don’t understand why you would not invest in your future, but many people fail to do this and the outcome is sad. You have to invest in your retirement, and you have to do it because you don’t want to live the remainder of our life in debt and unable to afford to live without a day to day job.

Not having an emergency fund

Listen, emergencies happen all the time. Not to jinx myself (knock on wood) but for months after we bought this house we incurred an unexpected expense of approximately $600 every single week. Septic issues, plumbing issues, air conditioning issues, random issues…you name it. Without an emergency fund, that would have been a lot of fun.

Automatically paying your bills

Thankfully, my husband is my banker and he is on top of everything. However, there have been a few times when that has come in handy more than you might ever realize. In fact, there was once a time earlier this year when my bank accounts were hacked, thousands taken out and I had to cancel all my cards and change my accounts. Seems uncool (it is) but pretty easy to resolve, and that was fine. However, all our bills are due the first week of the month and every single one of them is set up on autopay. What this means is that I input my debit card or account number on my accounts and they remove the payment on the same day every month.

For me, it works because all our bills are the exact same every month save for our credit card, which I just write a check for since we pay it in full. Our mortgage, insurance, our home security bill, our utilities (that changes, too, now that I’m writing it down) and our DirecTV bill are always the same each month, so I have them set up for autopay and I just write them down in our checkbook at the beginning of the month. Except for that month when my cards and accounts were new – I am really bad about not checking the account online and balancing our book for weeks or sometimes months at a time – and I forgot about that, wrote everything down and those things were not paid on time. Luckily, my husband asked me about it when he noticed nothing had cleared yet, and that reminded me that I’d never updated my new payment information. If he hadn’t caught it, we’d be paying late fees, seeing our credit score drop and it would have been ugly. And that leads me to…

…Paying your bills late

You have a due date, so make the payment on time. For me, life is very simple because everything is due the same week between the 1st and the 6th, so I just say it’s all due on the 1st and go from there. Some people say that they can’t afford to spend their entire check that week or whatever on all their bills at once, and I say, “Save throughout the month so that you can afford that very expensive week,” because it does not sound that difficult to me. Late payments add up to late fees, which add up to ugly marks on your credit.

Spending more than you make

It seems to me that this is pretty much common sense, but I’ve decided that not everyone has common sense and it should be referred to at this point as uncommon sense. If you make $10,000 a month, you cannot spend $12,000 per month. It is really that simple.

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