Why discretionary spending with debt is a bad idea


Never use debt to fund discretionary spending.” ~Roy Sutton

When you’re young you really want to enjoy life, right? That’s perfectly reasonable, surely? You’re fit, you’re healthy, you’re full of energy and there will never be a better time than now to enjoy yourself. If you can’t enjoy yourself when you’re young, when can you enjoy yourself?

If you’re lucky enough to have lots of money then good luck to you. Live life like there’s no tomorrow. The problem is most people are not quite so lucky. Most people are constrained financially, at least to some degree.

Equally for most young people, earnings are quite low when they start out on the road to independence and there are bills that can’t be avoided.

Everyone needs somewhere to live. We all need food to eat. We all need heating and lighting as well. Then there are all those taxes and municipal charges that must be paid too. So for most people there’s probably not a lot left at the end of the month for discretionary spending.

The temptation then is to borrow money so you can have a good time. Going into debt to fund discretionary spending is a really bad idea. So don’t be tempted.

Spend money you don’t have on anything that is not absolutely essential and you will be on the road to the poor house.

Some things you cannot live without. For instance if you want somewhere to live then you’ll probably have the need to buy a house. Unless you’re a millionaire, buying a house will mean a mortgage which is a form of debt. However that is good debt in the sense that you’ll be buying a home which is also likely to be an appreciating asset. So on that chances are you won’t lose.

Interest rates on mortgages are low because the mortgage provider will secure the debt against the property. You fail to pay and they’ll take the property. In this case risk for them would be low, so that is reflected in the interest rates charged.

Debt for discretionary spending is quite different. That will be unsecured debt and so interest rates on that debt will be very high. If the debt is on a credit card then chances are you’ll be paying in excess of 30%. If the debt is in the form of a ‘payday loan’ then interests rates can be anything from 1,000% to as much as 4,000% or even more. Even a small loan can quickly become a massive debt due to the effect of compound interest.

If you’d like to take a holiday or buy a car or have a party or buy the latest electronic gizmo, then save up for it first. For items like these, you only buy once you have the money in the bank to cover the cost.

Debt when it is unsecured is always very expensive and once you get sucked into a large debt hole it can be a real struggle to get out again. Debt enslaves you; it is stressful; and it will keep you awake at night. The pleasure you might get from discretionary spending can quickly turn into a nightmare if it results in debt.

Getting into debt is easy; getting out again can be both difficult and painful. Don’t allow your better judgement to become clouded by your desire for a little pleasure. Everyone wants to have fun but don’t make the mistake of getting your kicks with money you don’t have.

However big the temptation; you will regret it later. Debt is a burden.

That of course is one opinion. What do you think? Your ideas and stories might help other people, so feel free to comment.

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© Roy J Sutton and Mann Island Media Limited 2017. All Rights Reserved.

Dealing with debt and curbing your overspending

Do you struggle when dealing with debt? Perhaps you’re looking for ways to curb your overspending. Certainly the burden of debt can be stressful. Surely life would be easier if you could find a way to reduce your debt burden? The problem is where do you start?

If you’re serious about dealing with debt then a good start point is to take a close look at what you’re spending. There are things you must have like a roof over your head, heating and light, and food on the table. Then there are those things you buy that you really could live without. Even for things you must have you can often overspend on these items in you’re not careful.

It is a fact that overspending is one of the main reasons why people get themselves into debt. You’re in the shopping mall or on the internet and you see something that is so tempting and you can’t help yourself. Buying is so easy with your credit card and so you do without considering whether you really need it or whether you can truly afford it.

Well that’s a habit you must change if ever want to be in control of your money and your life. Yes, it is a hard habit to break if it’s been part of the way you live your life for so long. That’s understandable but it’s not impossible. It can be done and it’s an important step on the road to dealing with debt.

So here are a few simple steps to help you to stop spending, start saving and live a life geared toward achieving financial freedom.

1. Admit you have a problem

The first step to curb your overspending habit is to admit that you have a problem. You can’t eliminate a problem until you recognize you have one.

Once you admit to yourself that you have a problem then you need to understand where your money is going. Unless you make a point of identifying where your money is going then it will simply disappear without you knowing where it’s gone.

Keep a journal to record your spending on a daily basis to keep track of everything you spend. Write it down and at the end of each week review what you’ve spent and where your money has gone. You might find that this is a real eye–opener for you.

With this approach you will be able to see what you’re spending on stuff that may not be absolutely necessary. Then it will be easier to develop a clear and concise spending plan whereby you start living within our means. Having a plan can then be the basis by which you start developing the self-discipline to allow you to break your overspending habit.

2. Make financial goals

In developing your spending plan you must also set some realistic financial goals for you and, assuming you have one, your family.

One goal should be to ‘pay yourself first’. What does this mean? It means as soon as you get paid you set a small proportion of your income aside immediately. You could set aside say 10% of your income. That can be used to reduce your debt burden initially and later, when your situation has improved, for savings each month.

By setting money aside when you get paid, it’s a bit like taxes and other deductions against you pay. They all get taken off and you get used to living on what’s left. Putting something aside is an important part of any personal financial spending plan.

Keep your financial goals in mind each and every time you’re tempted to make an impulse purchase or overspend on something you can live without. This will encourage you to make better spending decisions.

And when you’ve reached one of your financial goals, don’t forget to give yourself a little reward. Don’t go overboard of course but achieving a goal will make the reward all the sweeter and it will encourage you in the development of good money habits.

3. Cut up your credit cards

Credit cards can be a convenient medium for making payments but they can also be weapons of mass wealth destruction. When you have a serious debt problem don’t take a credit card out shopping.

Yes, they are a big part of today’s culture and it is might seem hard to imagine life without one. However studies have shown that people spend a larger amount when using a credit card because it doesn’t register with them that they are spending real money. And that’s why they are dangerous.

Essentially using a credit card is simply postponing the inevitable. It is actually real money and eventually the bill for your purchases will have to be paid.

So take the impulse out of shopping and start planning for purchases ahead of time by saving up the cash. You will be surprised at how much you save by not using plastic.

4. Seek out support

When you’re trying to break a habit, it is important to surround yourself with good people who will encourage you and steer you in the right direction when you’re tempted.

That means when you’re going shopping make sure you take someone with you who’s not afraid to remind you that you don’t need whatever it is you’re thinking of buying. Someone you trust who will be your conscience, if you like. Someone who knows your aims and will help you achieve them.

If there is someone who will hold you accountable for your actions, who forces you to recognize your bad habits then this will make your financial goals much easier to accomplish.

5. Take up a hobby

Our shopping habits often stem from the fact that we are simply bored. This is particularly true with shopping online. You’re sitting at home bored so you pick up your iPad or similar tablet and start browsing. Sites like Amazon are very good at closing a sale once they’ve got you. It’s all so tempting. And we’re all guilty of impulse shopping on the internet, at least to some degree.

So next time you’re bored, find something else to do. You could take a walk, go to the gym for some exercise, watch a film, read a book, you could set up a blog and share your thoughts with the world or perhaps just volunteer to help a charity. There are plenty of other possibilities, so just do something other than shopping that appeals to you.

In short, take up a hobby or two and keep your money in the bank.

Conclusion

This is not an exhaustive list but these few tips should help you to curb your overspending and develop better habits with money. If you change your ways you can start winning with money.

Don’t try to ‘boil the ocean’ just take small steps on a daily basis and this will help you kick your impulsive shopping habits. You need to start thinking about where your money is going and where you’d like it to be.

Start today and you’ll be a smart shopper in no time. With a little self-discipline you can go from being a complete spendthrift to becoming a super-saver quicker than you ever thought possible. Become a super-saver and one day you will achieve financial freedom. Achieve that and your life will be a lot sweeter and a lot less stressful.

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© Roy J Sutton and Mann Island Media Limited 2017. All Rights Reserved.

4 Signs your debt is out of control

Are you burdened with debt? If so, do you worry about how you’re going to pay the interests payments, let alone reduce the debt? Would you say your debt is out of control? Then again, perhaps you’re not sure whether it’s out of control or not?

Certainly debt is becoming an epidemic leaving those in its wake feeling desperate. It is a fact that debt enslaves you and the burden of debt will keep you awake at night. And of course debt can be extremely stressful, particularly when it feels like everything is out of control.

There are few things more terrifying than waking up each day knowing you owe thousands of dollars, pounds, dinars or yen in debt. Whether it’s credit card debt, car payments, student loans or any of the various forms of unsecured debt if will take you a lifetime to pay off and that’s a terrible burden to bear.

It you have any concerns about the levels of debt you bear, you’re not alone dear reader. This is a problem which affects many people from single moms struggling to make ends meet to CEOs of major corporations. Debt affects people from all walks of life. And it’s easy to get into a situation where suddenly you realize that you’re in over your head.

Now you may be wondering if there are signs that will suggest whether you’re heading for disaster?

If you are to enjoy peace of mind and a lifestyle lived within your means, then you must first acknowledge that you have a problem. Which in turn means you must resolve to dig your way out of the hole you’re in before it’s too late.

So what are the signs you must consider? Here are four:-

1. Living Payday to Payday:

Do you find yourself having no money immediately after you’ve been paid?

Perhaps this is an experience you’ve had recently? Your money comes in and your money goes straight out again. The result is you left wondering where it all went and why.

A recent statistic suggested that around 76% of Americans live this way. Perhaps that’s an exaggerated figure but probably not by much and it’s the same in many developed economies, people living beyond their means.

Now you work hard for your money don’t you? In that case, doesn’t it make sense to take control back and start managing your money wisely? Perhaps having a budget and living within your means?

2. Creditors are calling:

Ever had that experience where you owe people money and they’re knocking on your door demanding repayment? It’s not a nice experience that’s for sure. Collection calls can ruin your day and your reputation too.

Creditors call at the oddest hours because they want to ensure they catch you at home. They can often be aggressive and nasty too. This is stress you really don’t need.

If you get to the point where your bill has been sent to a debt collection agency because you can’t or won’t even make the minimum payment then you have a serious problem. This is when you know your life is getting into a real mess. And you really don’t need this much stress do you?

When creditors are calling this is a sign that your debt needs reducing and your household needs a budget.

It means you’re in a financial hole and so when you’re in a hole your first action must be to stop digging.

3. Impulse Spending:

Retailers love impulse spending and they have lots of tricks to bounce you into buying things on impulse. They place some item they know you can’t resist in a place you just can’t miss. You see it and you buy it. Well it’s hard to say No to your inner child, isn’t it? We all do it, occasionally.

The problem is if you buy stuff you don’t really need on impulse that’s money that could have been used to reduce your debt.

Impulse buys can lead to a mountain of debt if you’re not careful. The problem is you usually buy with a credit card which comes with very high interest rates. When you get the bill for your credit card if all you do is make minimum payment then the magic of compounding will very quickly turn a small debt into a large one.

If you can have your money budgeted out each month this can reduce the temptation for impulse buys because you have already told your money where it is going ahead of time.

It’s a good idea to know what you’re money is committed to and it’s an even better idea to say No to your inner child. Well it is if you what to avoid the stress that accompanies a debt burden.

4. Money Fights:

Possibly the greatest source of conflict in marriage is money, or lack of it.

Money fights tend to happen when you and your significant other are not on the same page regarding the flow of money in and out of the household.

Naturally this is a source of stress and frustration in the marriage and is one of the biggest causes of divorce today.

You both need to be on the same page where money is concerned. You both need to discuss money and make sure you agree a spending plan that will work for both of you, whilst minimizing the risk of incurring unnecessary debt. You should both know what to expect where money is concerned.

Conclusion:

If any of these signs sound familiar to you then it’s probably time to start thinking about how you can cut down on your spending and start getting rid of whatever debt burden you may have.

Dumping debt is not as hard as it may sound. It’s not easy of course but with careful planning and discipline it’s not difficult either.

A written budget is a good way to start pulling yourself up from the depths of debt despair. And you needn’t worry because there are plenty of resources out there to help you get started.

The hardest part is the change of mindset you’ll need. See yourself not as a spendthrift but as someone who chooses to manage and spend money wisely. Someone who lives according to a proper spending plan

If you stick to your spending plan you’ll be on the first leg of the journey towards a lifetime of financial freedom.

Financial freedom means no stress where money is concerned and not having to worry about how you’ll settle the next bill.

Financial freedom is peace of mind and that is wonderful thing. Even if you’re not there yet I’m sure you’ll recognize it as the ideal place to be.

Of course this is one opinion. What do you think? Do you have any suggestions of other signs people might consider? Do let us know. You could be of great service to other readers.

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© Roy J Sutton and Mann Island Media Limited 2017. All Rights Reserved.

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