Trying to live within your means and avoid crushing debt can be difficult. If you’ve been trying to stick to your financial New Year’s resolutions, there are many pitfalls and traps. Follow these tips to avoid common debt traps and maintain financial health.
The Fear of Missing Out (FOMO)
Media and marketing are constantly trying to convince you, the consumer, that there is a life better than your own out there. A faster car, an exotic vacation, the newest fashions … commercials and ads bombard you constantly with the illusion of something better. They attempt to convince you that you are missing out on something, which amplifies your psychological need for instant gratification.
Being aware that marketers are targeting your innate psychological weaknesses is the first step to combat their influence. Keep a firm grip on what you want versus what you need to build a resistance to the influence of advertising. Fight the FOMO.
Spending Money You Did Not Save
Have you ever found a great deal — something you wanted at an unbelievable price? Did you save $50, or $100 on that purchase? Well, the bad news is you didn’t save any money – you spent money. Sure, you may have picked up that tool for $100 instead of $200, but don’t be fooled into thinking you somehow have an extra $100 to spend.
The reality is that you spent $100. The only circumstance where this is even remotely true is when the tool is in fact something you need.
Bulk Is Not Always Best
Retailers try to pump up their sales volume by offering deals. Anything good for the retailer is likely bad for you. BOGO offers and other multi-item discounts are the most common. The reality is that these sales are usually not good for your pocketbook, merely encouraging you to spend more than intended.
Bulk buying does make sense for items with long shelf lives, such as canned goods and dry goods. The trap is that you can end up with a pantry full of goods you are not using, forcing you to overspend on your grocery budget to meet your family’s needs. Starting with a plan, only purchasing bulk items when it fits your needs, and your budget can handle the bulk purchases.
Ever heard the phrase, “An ounce of prevention is worth a pound of cure”? Unfortunately, many people make purchases as a result of an event – an item wore out or the car broke down. Planning ahead – budgeting for and following through on routine items can save money.
Car maintenance is a great example – regular tune-ups, oil changes and brake repairs (pad replacement) can prevent major engine failures and brake overhauls. As your vehicle ages, the need to allow for more frequent and higher costs for maintenance in your budget will be necessary.
Careful budgeting and a little willpower go a long way to avoid common debt traps. If you need help paying off debt, book your free consultation with us now.