Common Debt Denial Signs That Can Break Your Bank
Are your credit card statements left on your desk unopened? Are you avoiding paying your bills?
You might find yourself guilty of debt denial – something that can easily be avoided.
Here are some signs you might be a victim of debt denial.
1. Not All Debt is Created Equal
Not all debt is good. Over-borrowing can prove disastrous to your financial health.Too much debt will bog you down financially and limit your purchasing power so much that a time may come when you won’t have the money to cover your basic needs. Good debt is debt that is manageable. Bad debt, like high interest credit card debt that has snowballed out of control, becomes an unmanageable burden on your life. If you can’t afford to meet existing obligations like your mortgage or student loan payments, as per your loan agreement, then you should avoid opening up new credit until you’re sure of your loan affordability.
2. You Only Make the Minimum Payments
You could avoid your debt for a period of time and carry a couple of high interest credit cards with loads of outstanding balances, but that shouldn’t be your approach to money, especially when you’re dealing with credit. Managing too many accounts at one time is difficult. You may forget payment deadlines or pay just the minimum amount to keep your accounts current. However, making minimum payments is costly as you will be paying off your high amounts of interest for a long period of time. Doing so will siphon your savings and checking accounts and prevent you from living a stress-free life.
3. You Keep Opening New Credit Cards
Debt denial can come in a variety of forms and one of the most detrimental is opening new credit cards without proper planning. Suppose, you took out a 0% balance transfer card to save on interest. You promised yourself you would pay off your outstanding credit card balances in the next 12 months. However, you never thought of your ability to make larger debt repayments. It’s likely that you would revert back to using your old card, charging one item after another. This time you’ll be carrying two credit card debts simultaneously. Rather than robbing Peter to pay Paul, consider creating a plan to pay off existing debt before opening another credit card account.
The key to healthy credit card use starts with creating a budget. A budget will let you know where your money is going, where you can limit your spending, and teach you when to use cash or credit. Furthermore, a budget can help you create a debt repayment plan as you will now have a better understanding of your spending habits and where you can save money. It willl help you to unlock your money management potential and keep you within your spending limits throughout the month.
4. You Think Your Income Will Exceed Your Debt
The truth is even a six-figure salary won’t prevent you from breaking the bank if you’re in constant debt denial. Excessive credit card use may exhaust your credit limit and then, you may not have the opportunity to use them for yourself or your family when you need them the most. If cash flow is a problem, consider taking up a side gig after your normal working hours. It’ll supplement your regular monthly paycheck and provide you with more cash to make extra debt payments.
Lastly, when you decide to face your debt challenges head on, you’re initiating a role reversal since your debt no longer controls you; it will finally be the other way round. Once you start paying off your debts, you’ll feel empowered about your finances. You’ll gain the freedom to live life by your terms.