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7 Types of People Who Can’t Avoid Debt

7 Types of People Who Can’t Avoid Debt

Living in a first-world country has a lot of perks and being able to buy things you can’t immediately afford is a big one. Taking out loans and acquiring a bit of debt is an essential part of life. In an ideal world, people would use credit for major, life-altering purchases like a house or a car and then pay off the debt within the next few years. However, this idealistic scenario hangs on the assumption that people are incredibly responsible and will be able to create an effective budget and stick to it, even if it means not being able to afford all the pretty, shiny things that they want. There are people out there who just can’t seem to avoid debt; they seem almost drawn to it. If you want to avoid becoming one of them, you need to understand what it is that causes problems with credit.

1. People whose buying decisions are influenced by others

The type of person that is most likely to accumulate debt is one who is unsatisfied with his life and always looks to others with envy.  These people falsely assume that if they buy the same things and live the same lifestyle as someone they admire, they will somehow be respected and achieve a sense of fulfillment. Just because the Johnsons from down the street have a Mercedes parked in their driveway doesn’t mean that you have to go out and get one, nor do you need some of the high-tech gadgetry and jewelry they flaunt at local parties – particularly if all these things are well above your pay grade. In order to avoid becoming this type of person you’ll need to sit down with your significant other or family members and have constructive discussion about what you can do to feel comfortable in your own skin and how much you can actually afford to spend on various items. There are a number of self-help books and motivational videos out there that will help you come to terms with your finances.  You need to realize that respect and happiness aren’t synonymous with owning a bunch of high-end equipment and expensive clothes.

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2. People who are impulsive buyers

Excited Shopping Woman

    Some people just don’t seem to have any self-control whatsoever. They will walk around the mall like  little squirrels gathering nuts for the winter, turning their heads at every “Sale” sign and stopping at every shop window. It doesn’t matter whether they need an item or not, they will buy a new blender, rowing machine, tablet or purse, simply for the thrill of it. Now, there is nothing wrong with going on an endorphin-inducing shopping spree every now and again, but impulsive buyers will accumulate large amounts of debt by constantly buying impractical items they don’t really have a use for, or even useful items that are way out of their price range. Knowing your priorities and being realistic can help you avoid using credit to make impulsive purchases. When you get an urge to buy something, take a moment to breathe and remind yourself that your finances don’t allow that type of purchase right now. Write some of those expensive, pretty things down in your wish list and quench your thirst for shopping by buying some inexpensive trinkets.  As long as you buy something new you will get that rush of excitement you usually get from shopping; just keep it cheap and simple.

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    3. People who take random advice from others

    While your family and friends can sometimes be a true source of inspiration and offer a helping hand and shoulder to cry on, not every piece of advice they give will be particularly sound. Remember, these people are not, for the most part, experts on business and finance, and there is a good chance that they have heard a few sentences on TV or read something online a few years back and now feel qualified to give out all kinds of advice on how to avoid debt or pay it off. If you want advice on developing a good budget and getting your finances in check you need to consult professionals. When a friend or family member gives you some financial advice, just nod politely and thank them, then double check it when you get home and see if what they suggest really works.

    4. People who don’t have clear goals

    It’s a sad sight to see, but there are plenty of people out there in their early thirties acting like teenagers and focusing on game consoles, video games and beer rather than investing in their home, their children’s clothes or paying off their student loans. When you are that selfish, irresponsible and have no real ambition and clear goals it’s easy to lose sight of what’s important and continue living in an imaginary world where things like financial stability, family, responsibilities and hard-work are disregarded in favor of  trivial things. Having some kind of idea of where you want your life to go is important if you don’t want to become this type of person. Setting goals for yourself isn’t really difficult – you need one or two major goals that you want to achieve in  5-6 years and few smaller goals that can be achieved within the next year. The goals can be as simple getting in shape or paying off your car by next year, but all of this should tie in to your long-term goal, e.g. getting a bigger apartment so you can move in with your partner.

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    5. People who don’t have a savings account

    A savings account with a couple of thousand dollars on it can serve as a safety net. If an unexpected event occurs and you don’t have any money stashed away, it can end up ruining your efforts to pay of your existing debt or cause you to fall further into debt. People who have at least a thousand dollars saved for rainy days can deal with all sorts of problems and suffer much less stress than those getting by paycheck-to-paycheck. Be sure to set aside a bit of money each month – even $100 or $200 every month can be enough. Change your thinking about windfall money; your tax refund, a bonus, or a generous gift should be seen as an opportunity to build your savings, not to buy some big-ticket item you’ve been wishing for.

    6. People who don’t know how to create an effective budget

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    Girl writting in notebook

      Writing things down on paper has an incredible way of enlightening you as to where you are going wrong. You can justify all kinds of bad decisions in your head, form a distorted picture of reality and even lie to yourself about how much you spend on things that are not essential, but when the cold facts are sitting in front of you, in black and white, it’s much easier to create a plan and make the right budget cuts. Write down how much you earn – coupled with how much other members of the household earn – and make a list of your monthly expenses. You need to divide the expenses into several categories, but the most important classification is necessary, fixed expenses (car payments, rent, bills, etc.) vs. flexible expenses (food, clothing, gas, hygiene products, etc.) vs. optional expenses (video games, new hat, blender, etc.). Savings can be made on flexible expenses (avoiding overpriced name brands, buying food in bulk, using coupons and looking for good deals) while a lot of optional expenses can be cut out of the budget altogether or put on hold for a couple of months until your finances start shaping up.

      7. People who use credit for everything

      It is quite reasonable to use a credit card in some situations and take out loans when a major investment is required, but there are people who’ll make 3-5 small store runs during the day and just keep putting things on their credit cards. When you buy with cash you have a very good idea of just how much you are spending.  When using a credit card it’s easy to get carried away and forget that all those little purchases add up to quite a bit. If you want to stay debt free, consider using cash for smaller purchases or creating a list of things you need for that day and buying them all in one go. Weekly shopping runs are a great way to save money because you buy in bulk and avoid unplanned, spur-of-the-moment purchases like random snacks and drinks. Having a list prepared ahead of time will help you to get everything you need in that one trip, and will also help curtail impulse buying.

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      These seven types of people can’t seem to avoid debt for many different reasons. If you want to learn how to keep yourself from accumulating more and more debt and wish to pay off your existing debt,  you will need to identify the mistakes these people make, understand why they lead to more debt, and try to avoid making the same mistakes.

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      Ivan Dimitrijevic

      Ivan is the CEO and founder of a digital marketing company. He has years of experiences in team management, entrepreneurship and productivity.

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      Last Updated on July 20, 2021

      Financial Freedom is Not a Fantasy: 9 Secrets to Get You There

      Financial Freedom is Not a Fantasy: 9 Secrets to Get You There

      Have you ever considered your life now, and how it would be if you had more time to spend with your family and less worries about money?

      Nowadays, financial stress is one of the most troublesome weights in life. If you’ve ever encountered financial stress, you know the difficulty of not having enough income to pay your obligations or bills.

      Many people say that money is not the ultimate goal of life. While that’s true, money certainly plays a very significant role. The meaning of financial freedom changes with the different phases of our life, but ultimately, it is something that many people strive for.

      In this article, we’ll explain how to capture that financial freedom you’ve been looking for. Read on to learn the secrets to financial freedom.

      Break Free of Your Finances

      Financial freedom is about having a constant flow of cash from your assets to cover all your regular needs.

      When you are not worried about your income, or living paycheck to paycheck, you gain a great sense of freedom. It’s the freedom to be obtain and do what you truly need to make your way through everyday life.

      Gaining financial freedom, though, is a process of growth, making small improvements and gaining emotional strength.

      Though it seems hard to believe, it is really very simple to get financial freedom.

      To do so, you simply need to make sure that your assets exceed your liabilities. In other words, you’ll need to find the sweet-spot where your residuals meet or surpass your expenses. This is something that you can achieve with the proper plan.

      While not every person will accomplish financial freedom, the potential for anyone to do so is certainly there. Anyone can achieve this success, regardless of their income level.

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      Outlined below are 9 secrets that will help you in your goals of achieving financial freedom.

      1. Stop Unnecessary Spending

      We often spend money inwardly, instead of objectively.

      For example, you may spend when you’re anxious, depressed, restless, exhausted, from fear of missing out, or to please others. This is a very unhealthy way to handle your finances.

      To stop this habitual spending, log down all your spending over the course of a month.

      Just as some people keep a food diary, keep an expense diary. Remember not to just write down how much and what you spent the money on, also include the circumstances of why you spent the money. Was it an impulse buy at the checkout line or was it something you planned to purchase?

      This increased self-awareness could enable you to avoid triggering situations in the future when you are considering an impulse buy.

      2. Plan a Monthly Budget

      This is a great opportunity to get serious.

      Take a seat with your spouse or partner and make a monthly budget based on your income, not your expenses. You are never again going to spend more cash then you have on hand.

      Overspending is the thing that led you to more financial obligations. Make sure you decide every month what is coming in and what will be going out and stick to that budget… no matter what.

      3. Cut-up Credit Cards

      Perhaps you are the type of person who always pays your credit card balance in full before the end of your billing cycle, and enjoys the reward points you gain. If this is the case, then you’re already way ahead of the game.

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      If not, you may want to consider ridding your life of the burden that credit cards bring.

      Many cards have strategies set up so that if you make a certain number of late payments, they will raise your interest rate much higher. This can really add up in the long run and you won’t be doing your financial situation any favors. If you’re prone to late payments or have a large balance due on your cards, cut them up!

      Without proper self control on credit card spending and payments, you are basically throwing your money away. To ensure that you have better control over your spending, use only cash or debit for all future purchases (and don’t forget to pay at least your minimum payment on your cut-up cards each month!).

      4. Increase Savings

      There is no doubt that for a comfortable retirement you must accumulate satisfactory savings throughout your working life.

      It’s good practice to save up to 15% of your income.

      Start with your workplace 401(k), if you have one. If not, a Roth IRA (if you are eligible) or a traditional IRA (if you are not eligible for the Roth) are the next logical steps.

      Increase in longevity means you might be able to look forward to 25 to 30 years in retirement, or possibly even significantly more. Investing now in good retirement plans will ensure that you have a guaranteed a stable monthly income when the time comes to stop working. [1]

      5. Invest Wisely

      Consider investing in funds.

      Specifically, you will gain higher returns if you invest in different types of mutual funds such as Debt funds, Equity funds and Hybrid funds with a proper balance, although it absolutely relies on your personal preferences and sense of risk taking.

      To get the most of these benefits, make sure you are investing in a variety of assets. Another resource of investing in mutual funds is SIP (Systematic Investment Plan) where you invest some money every month in funds. SIP works by averaging the per unit price of the stock.

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      Mutual fund investors are aware of the benefits of an SIP (Systematic Investment Plan). For one, it is the most secure way to invest in equity mutual plans so that wealth is created over a long period of time. This plan also helps you to gain a better sense of financial discipline, which will come in handy in all your financial endeavors.

      6. Invest in Gold

      There isn’t really a better way to invest in gold than to have the physical gold itself in your possession.

      You can purchase gold coins and bars from mints as well as from coin dealers and other private sellers.

      Another way to invest in gold is through ETFs (Exchange Traded Funds).

      These are is similar to mutual funds but they are exclusively investments of gold. ETFs are great because they offer more liquidity; the ETF owns the actual physical gold, stores it, and retains the value of the shares. These shares can then be bought and sold in the stock market, and one big benefit is that the transaction costs of gold ETFs are much lower than the that of physical gold.

      With its consistently-increasing demand, investment in gold can be very wise long-term investment to make.

      7. Stash Emergency Funds

      Whether it’s a cash gift or a work bonus, always try to save any extra money that comes your way rather than making unneeded purchases.

      If you get paid every other week, you’ll get an “extra” paycheck (three rather than the usual two) twice a year. Either save those paychecks towards your emergency funds or utilize the money to pay down other obligations, such as loans, credit cards or other debts.

      Make it hard to get your cash.

      Put your savings in an alternate bank, maybe an online bank that forces you to delay for several business days before transferred money hits your regular bank account.

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      8. Find Fabulous Mentors

      Find a mentor, such as a friend or family member, who has exceptional control over their finances and pay attention to everything they do.

      If you do not have any friends or family that are enjoying financial freedom, then find a mentor online! There are numerous blogs and guru websites featuring the advice of many people who have reached financial freedom, and they exist primarily to let you in on how to achieve it for yourself.

      There are also plentiful forums available that share tips and tricks on how to best achieve financial freedom. Read as much as you can and start changing your habits for the better.

      9. Be Extra Patient

      Patience is the key of financial success.

      Being patient can be quite tough, especially when you’re struggling with your finances, but having faith is worth it. You’ll continuously be on the right track if you are taking the proper steps above.

      So don’t be discouraged, even if you are only saving a few dollars a month; it all adds up. Within just a few years you’ll look back proudly at your accomplishments and be glad that you had the patience to get there.

      Financial Freedom for All

      Anyone can achieve financial freedom, regardless of their financial circumstance.

      Use the tips provided above to get yourself on the track to financial freedom and toss your monetary concerns out the window. If you wish to achieve a life with financial freedom for yourself and your family then you must adopt a disciplined approach towards your finances.

      Following the simple secrets above is a great start to making your money work for you, so you can work less and live more!

      Featured photo credit: rawpixel via unsplash.com

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      Reference

      [1] Hartford Gold Group: IRA Retirement Accounts

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