People often ask me what is the biggest misperception about being in debt. I guess they are looking for answers like banks suck, or maybe debt collectors are evil. But none of those impressions of cogs in the consumer finance wheel is either universally true or all that important.
I've been helping people with debt problems and money troubles since 1994 and in that time, without a doubt, the biggest issue people get wrong is the amount you owe is the root of problem debt.
That bank statement is just a reflection of the symptom, not the root problem. Unmanageable debt is the byproduct of previous decisions made and not the problem itself. Often the primary issue that needs to be tackled first is the underlying factors that are holding you back from either making sufficient income or blowing up your balances.
More often than not the drivers of debt are unconscious and emotional, not mathematical. You can read many examples of this by downloading my free book, The Path to Happiness and Wealth.
Recently AJ Smith submitted an article which really resonated. I had to share it with you.
4 Emotions That Can Cost You Money
We all get emotional -- it's human nature. The trouble sometimes comes when our emotional side overrules our rational side for money matters. Check out some of the common ways emotions can hurt your finances, discover if you are an emotional spender and how to combat the problem.
It is easy to become bitter when we see other people (whether they are friends, family members, co-workers, old classmates, neighbors or even celebrities) make big purchases. Between Facebook, Twitter, Instagram, Snapchat and all of our social media options, it's all too easy to compare our life to others. But trying to "keep up with the Joneses" can lead you to sabotage your own financial goals.
Instead of focusing on the jealousy or being embarrassed by your own means, try to use their success as a motivator. Think about what you have to be thankful for, evaluate your own finances, make a plan to forgo some expenses and save for what you really crave -- whether that's buying a home or paying off student loans.
If you are shocked when you check your bank account balance or get your credit card bill at the end of the month, you probably are not following a budget very well. You may look in your closet and find that you suddenly have a lot more clothes or shoes or have vague memories of eating out at fancy restaurants. It can be a good idea to pinpoint your triggers, start to weigh every financial decision carefully and track your spending.
3. Prone to Procrastination
It is easy to put things off for the future, but at some point that future comes around. If you tend to avoid responsibility for and procrastinate on activities like saving money, your future self may suffer. For example, your retirement can be in serious danger. If you don't trust yourself to be proactive about putting money away, try to find ways to make it easier. It can be a good idea to set up automatic deposit to send some funds straight from your paycheck to savings, emergency or retirement accounts.
The same is true with your credit. The costliest mistake home shoppers, car buyers and credit card users make is not knowing where their credit stands before they apply. That mistake can add up to tens of thousands of dollars over your lifetime since interest rates are heavily dependent on your credit scores. Doing work and rebuilding your credit well in advance of applying for loans can make sure you get the best deal possible. You can check your credit scores for free on Credit.com to see where you stand.
Sometimes when you come into a windfall or are making more money than friends and family members, you feel uncomfortable and think you need to share the wealth. This can lead to picking up the tab at dinner, for vacations or for other expenses. That money advantage can quickly disappear. To avoid this, it can be important to make a new financial plan and budget immediately. Then you can set up a section in your budget for spending that allows you to be generous with family and friends. You can also do things like invite friends to dinner in your home or choose a less expensive restaurant to visit.
- Retrain Your Brain to Cut Debt and Build Wealth
- How to Pay Off Credit Card Debt
- 5 Tips for Consolidating Credit Card Debt
This article originally appeared on Credit.com.
This article by AJ Smith was distributed by the Personal Finance Syndication Network.