5 Worst Money Habits That Lead to Debt and Ruined Finances

Are your money habits ruining your life?
Image Source: Flickr User Kool Cats Photography

Are you deep in debt and wonder how you got there? For some people, it's a major life event that wrecked their budget. This can include extended unemployment, divorce or a serious illness or disability. For others, the recent recession and hit to the economy ruined their finances. But aside from these factors that are out of your control, there are some bad money habits that can land you deep in debt and keep you there. We'll take a look at the five worst habits and what you can do to correct your course and rebuild your credit and financial stability.

#1 Chronic overspending

If you are earning a good wage, you may get into the habit of eating out, shopping for new clothes and buying a new car every few years. But then, when circumstances change, you don't alter your habits. For instance, you may lose your job and your new job doesn't pay as much. Or, you have a baby and don't reduce your other expenses to make up for the added cost. Some people just outspend what they earn, no matter how much they earn. Spending more than you can afford to leads to credit card debt, inability to save and living on the brink of financial collapse.

#2 Competitive spending

If you have friends, neighbors or family members that have a lifestyle you desire, you may try and keep up with them. They take a costly vacation and you don't want to admit you can't afford to, so you max out your credit cards to take a trip. They buy a new car and suddenly your five-year-old vehicle feels shabby even though it's running fine. In some cases, you may be accustomed to a certain lifestyle, then your circumstances change, but you keep spending to keep up appearances. The fact is, those people you're trying to keep up with may be drastically in debt as well.

#3 Unwilling to budget

You may not want to face that you can't afford what you want. You may want premium cable with a full sports package. You may want to eat out several times a week and go out for drinks with friends after work. You may want a new car every year and designer clothes. But just because you want these things doesn't mean they're good for you, that you can afford them or that you truly need them. And, you may be able to obtain these things through debt spending. You may have maxed out credit cards and live paycheck to paycheck. But is the stress worth it?

#4 Lack of effort

You may know you're deep in debt and need to do something about it. You may even know exactly what you need to do – set a budget, cut back on your lifestyle, spend less and work toward reducing or eliminating your debt. But you don't. Maybe you don't want to think about how much you owe and are putting off the day of reckoning. Maybe you hope things will work out. Or maybe you're a procrastinator of the highest order and just never get around to it. If you're overweight and don't make the effort, you won't lose weight. Debt works the same way. It won't go away on its own.

#5 Lack of knowledge

You may understand you're deep in debt to a disastrous extent and want to do something about it, but you don't have a clue where to start. Maybe you have no idea how to set a budget and no practical knowledge of how to manage money. Or, you may be so mired in debt and living paycheck to paycheck that you can't get a perspective on your whole debt picture to develop a strategy. There's no shame in not knowing something, but where you should be concerned is if you don't take measures to correct it and educate yourself.

If you're deep in debt that you can't afford to pay, Chapter 7 or Chapter 13 bankruptcy can help you to get the financial fresh start you need. However, if you don't also take steps to correct your bad money habits, you may end up back in debt again. Part of the bankruptcy process is a debtor education course that can help you assess your spending habits, recognize problem areas and develop a budget to keep you on track. This is something to take very seriously to help ensure you can enjoy the full benefits of your bankruptcy.

Contact the law offices of John T Orcutt today to find out more about how bankruptcy can help you get the peace of mind and financial stability you deserve. Call +1-833-627-0115 now for a free consultation with one of our North Caroline bankruptcy experts. We have offices in Greensboro, Raleigh, Fayetteville, Garner, Wilson and Durham. Be sure to ask about our zero down bankruptcy special.