The mistake that people make and keep in debt

The mistake that people make and keep in debt

Select’s editorial team works independently to review financial products and to write articles that we think our readers will find useful. We earn a commission from affiliate partners for many offers, but not all offers on Select are from affiliate partners.

Debt settlement is easier said than done. Some people may only be able to pay the minimum amount required each month – this means that they are barely scratching their balance and continue to raise interest rates, making it even more difficult to pay off their debts in full.

For others, however, they may make considerable efforts to get a lower debt balance – but then they get into debt and their balance increases. Then they are allowed to go through the motions to reduce their balance again.

These experiences can be frustrating and exhausting – and can make many people feel that they will never be able to break their debt cycle, despite positive habits such as making timely monthly payments.

According to Paco de Leon, author of “Finance for the People: Getting a Grip On Your Finances,” our subconscious habits can often be a problem when it comes to staying out of debt for good. And if we don’t acknowledge and deal with it, it can get us stuck in that debt-ridden cycle just to do it again.

“It is important to note that everyone will have their own personal situation, which becomes the reason why the debt cycle is perpetuated and it is everyone’s responsibility to figure out what is happening,” says de Leon. “For some, this is due to the fact that they do not earn enough money and there are a lot of circumstances that overwhelm all their efforts. And there are some people who are facing traumas that they may not be aware of. ”

For example, de Leon tells of a woman who grew up in a household where her parents were always arguing. This put a strain on her, and she went online and did some shopping. So, even as an adult, she found that whenever she was really stressed, she turned to retail therapy and used shopping to ease her anxiety.

For someone in this situation who has accumulated a lot of credit card debt through shopping, it wouldn’t matter much in the long run if he increased his salary or changed jobs to pay off his debt; the need for their subconscious to go shopping whenever they are stressed will keep them from spending too much on their credit card, no matter how much they pay out of balance and no matter how much they earn.

Instead, someone in this situation should find a different way to deal with stress that does not involve shopping. By finding a different way to deal with stress, they can rely less on retail therapy to alleviate these feelings. And as a result of lower expenses, their credit card balance may stop growing and they may be able to pay it off sooner.

Get to the bottom of your subconscious debt habits

“When people do not understand the circumstances that led them to go into debt, they fall victim to these circumstances again,” de Leon explains.

She recommends the journal as a great way to start discovering some of your beliefs and habits about how you spend money and use debt. Hiring a coach and also discussing debt and trauma with family members and loved ones can help you figure out how some of your habits have developed and what you should do to overcome them.

And while tracking your expenses can often be daunting or stressful, it can be an effective way to get a clear picture of where your money is going. Apps like Mint or You Need A Budget (YNAB for short) connect to your account. your bank and credit cards so that they can automatically track and classify your expenses for you – in other words, you don’t have to meticulously check every bank account statement. to know where your money is going. Tracking your expenses can make it easier to connect your points when you notice higher-than-usual spending on exactly what triggered them.

If you think that having considerable debt has been a source of great financial stress, there are several ways in which you can try to minimize your balances and start to feel more in control. Balance transfer credit cards, for example, such as Citi Simplicity® or US Bank Visa® Platinum, allow you to transfer your credit card balance to a new card and pay as much as you can with a free deposit. interest rate. offer. This can change the game for people who believe that credit card interest affects their monthly payment and prevents them from paying their balance fast enough.

But if you have different types of debt that you feel are out of control, you can use a personal loan to consolidate them all into one monthly payment, often at a lower interest rate. So suppose you took out a loan like the LightStream personal loan or the SoFi personal loan: you will apply for a certain amount enough to cover the total of all your debts, and the lender will send a specified amount to each of your creditors to pay those debts. . Then you will only be responsible for repaying the personal loan in the form of fixed, equal monthly payments plus interest. This can sometimes be more achievable for those who feel that managing multiple monthly payments to multiple lenders is overwhelming.

There are also other more personalized ways to get help when it comes to debt. A Certified Financial Planner (CFP) may also analyze your spending habits and identify patterns or areas for improvement that you may not have considered yet. You can use Zoe Financial to find independent CFPs and trustees who can help you with specific debt concerns.

Conclusion

Debt settlement is often about earning enough money to pay off your balance every month. In some cases, the habits we have subconsciously formed are the reason why our debt cycle persists. But over time, journaling, discussing your debts and trauma, using available financial products, and seeking help from a financial professional can help us understand our circumstances more deeply.

Editorial notes: The opinions, analyzes, reviews or recommendations expressed in this article belong exclusively to Select and have not been reviewed, approved or otherwise endorsed by any third party.

Leave a Comment