Unfortunately, debt is something that almost every American goes through. These habits can be learned through families, but there are ways to break the debt cycle. You may be sucked into frivolous spending habits or lending money, which can cause you to go into debt. You can become debt-free if you follow these simple and tricks that can help you live a debt-free life.
The debt cycle repeats based on your learned behaviors. Breaking them is a challenge and will require a real conscious effort, but it is doable. Read on to learn about ways to break the debt cycle and live a stress-free life full of financial freedom.
How to Break The Debt Cycle
Each of these ways to break the cycle can be done together, or you can use a few of them that seem to work for you. Unlearning learned behaviors from our parents can take time and patience, so don’t be upset if it takes some time to see results.
Distance Yourself From Bad Money Habits
If you want to establish financial wellness, the first thing you should do is to distance yourself from others that may influence your spending or only see them rarely. This can be extremely difficult, but you should have minimal contact when spending money until you get your spending under control. This does not mean you cannot see them socially, but situations involving money should be avoided.
You will be able to stay focused on your goals and have a smaller opportunity for spending frivolously. By shopping with financially stable people, you should keep more on track and focus on things you need instead of things you want.
Breaking away from family can be difficult when money is involved. This includes lending money or buying someone something that can be expected and can be detrimental for your financial health. But by sticking to your habits, you will be able to break the cycle of bad spending.
Identify Your Spending Habits
The first step in breaking any debt habits is to identify you have a problem. If you notice your debt has been increasing, you need to look at your spending habits. There are plenty of ways to do this and it can help you know where your money is going.
Technology
There are so many ways to track your spending using technology. You can utilize apps like Mint or Truebill. They will show you how much you are spending and what you are spending your money on.
They can even show how much money is coming in and where it is going. It will give you an idea of your spending breakdown. This is crucial for your success in breaking the debt cycle because it can show you what you can cut out or change in your spending.
There are also ways to get notifications when you spend, which means you will always be aware of when you are spending money, even on subscriptions or bills.
Manually Balance Your Checkbook
If phone applications are not your thing, you can always track your spending habits using a checkbook. A checkbook will allow you to see a running total of how much you are spending while also helping you see the money going in and out of your account.
This does require patience and getting receipts for each thing you buy. You will then need to make sure you are diligently writing down your purchases. This will help you to see where you are spending too much. You can also use the checkbook by adding your assets from your online bank account to your checkbook. This will ensure you do not have to collect receipts and keep track of your spending.
Change Your Mindset
Once you have a handle on where and when you are spending your money, you can think about what you spend your money on. You can then focus on changing your mindset to be focused on saving money and not spending frivolously.
This can be a complex pattern to break and can feel tedious and unfair. But changing your mindset towards “do I need this item, and do I have the money for this item?” can help you to make in the moment decisions about what you are spending.
Tracking your spending can help you see all this, but you need to figure out your feelings or motivations behind frivolous expenditures. You may feel sad or upset when you are spending frivolously that can affect your spending.
You may also shop or eat socially, which can cause you to spend more money. Being conscious of these situations as well can help you change your mindset on spending. This can help you to save more money and think differently about your money.
Set Goals
After you have changed your mindset and track your spending, you then need to set goals. These goals should center around your saving goals and paying off your debt. You should look at your income and designate some of the money for both your savings and your debt.
Saving money is essential for your financial well-being because it will keep you from having to go into debt in the future.
When setting these goals, you need to be specific. You can’t be ambiguous. Being ambiguous will not help you to keep all your saving goals in your mind. By using specifics of how much you will save or what you are going to stop doing. It will help keep you on the right track.
Finally, place this goal somewhere you will be able to see it every day. Write it down and put it somewhere you can see it every day, like the bathroom mirror or on the fridge; this will keep you accountable. If you feel comfortable, you can also share it with others, and they can help you stay responsible for your goals.
You can always set long-term goals of when you would like to be out of debt, but it is better to have shorter-term plans to help you achieve success. Focus on goals and habits you can achieve in 30, 60, or 90 days. This will keep you on track with your saving and debt-free goals.
These goals can be focused on what you are buying or even what you are saving every month. This can be as simple as I will only eat out twice per month or save this much money by the end of thirty days.
Budget
After you set your goals, you need to determine your budget. This should be based on your saving goals and paying off your debt. Once you decide how much your living costs are, you will determine how much money you can spend on other things.
You can then determine what you need to change about your original spending habits and what things are essential to spend money. This will help you to feel more secure in your money and make decisions based on that.
Technology can be beneficial because it can tell you when you spend money and will even help you create categories for what you are spending. This will keep you from paying without knowing and allow you to see when you are over your budget.
Watch Your Credit Card Bill
After you set your goals, pay attention to how much you are spending on your credit. Make sure when you buy things, you can pay them off with whatever budget you have given yourself. You can then make sure your debt is not growing anymore.
You will also need to unlearn the mentality of buy now, pay later. It can give you a false sense of security and make you pay less attention to how much you are spending. You can then see if you have finished the amount you have saved for the month. This will keep you on track.
Track Your Spending
By watching your credit card bill, you want to track your spending. You want to make sure you are spending within the budget you have given yourself. This means knowing where you are spending your money. So, either using online applications, bank statements, or even receipts.
These will help you to know where your money is going. It will also help make sure you are spending the right amount of money and saving the right amount of money. Once you have decided the amount you can spend a month, you will know you have hit that amount by keeping track of your spending.
This will help you not to overspend and keep your budget intact. You will be able to reach your goals better if you keep track of them at all times. Including bills that are paid electronically that you may not notice are being paid for every month.
Shop from A-List
One of the best ways to curb your spending is to shop from a list. Sometimes going into a store with an inventory list can lead to a lot of impulse buys. An impulse buy can be expensive and can hurt your overall budget.
A shopping list allows you just to buy the things you need while focusing solely on those things. A list does not allow for impulse buys and forces you to buy within your budget. You can give yourself prices for something on your list to make sure you are staying within your allotted amount.
Even going to the store for things other than groceries can be shopped from a list. You can keep yourself to only buying certain items and only things you need.
Pay Attention to Hidden Bills
When you sign up for subscriptions, you can have a link to your checking or savings accounts to pay them every month. When you are looking at your bills, you will want to make sure you are including those and tracking how much they cost you.
Sometimes subscriptions will go up in price or be charged. You must pay attention to that and note it in your budget to keep yourself on track.
These hidden bills can creep up on you, especially if you don’t use them regularly. If you notice you are not using a subscription regularly, you should cancel it. This will help you from spending unnecessary money and keep your debt down. They can help you keep your spending down and within your budget.
Tackle One New Habit at a Time
It can feel overwhelming to institute all new habits and financial wellness all at once. By taking your time and choosing one pattern to work on, you will slowly add more habits in and break your negative spending habits.
For example, you could focus on limiting your eating out spending or shopping spending one month, and then focus on the other one the next month in addition to what you did the first month.
Make Good Habits Without Thinking
One of the best things you can do is to make auto pay your friend. Autopay can be used for most bills, and the billing company will take the money right out of your account. This helps you to know in closer to real-time what is being taken out of your account. It allows you to see more clearly what money you have and how you’re spending it.
This helps you establish good habits without thinking about it and paying all your bills on time. It can also have you establish dates when the companies will take the money out of your account, allowing you to check it diligently.
Pay Attention to Fees
One thing you need to pay attention to when paying off debt is paying attention to fees. Banks can charge you overdraft fees that can be expensive if your card won’t fully cover the cost of something. These can be expensive and add up over time. Credit cards can also charge you interest if you don’t pay off the total payment over time.
These can add up over time and take away from your money grow. These things can be unnoticeable at first, so you must be paying attention to your account balance and what your bank is charging you per month.
Ask For Help
If you have a lot of debt, it may be worth looking into consolidating your debt. You can meet with your loan company and see if it is possible to put all your debt together into one lump sum payment. This can help make your interest payment less and allow you to pay off your debt faster.
You may also be able to renegotiate your debt if it is exceptionally high and help you achieve financial freedom faster.
These things can help you get out of debt quicker but should be used more as a last resort. They can be expensive and costly and may affect your credit score. But if you are feeling overwhelmed by your debt, this may be an option for you.
If you choose to go down this route, you need to make sure you have a good credit score. So by paying down your debt in increments every month can up your credit score and should be done before turning to this option. Also, paying bills can help you up this score and help you achieve financial freedom quicker.
Be Patient
One of the most critical aspects of escaping the debt cycle is being patient. Getting out of debt and changing your habits can be a time-consuming process. It will take practice and time to rewire your brain to think in a financially sound way.
Getting out of debt takes a lot of time and payments. Inevitably you will slip up or make mistakes, but over time you will grow into your habits and understand the strategies that can be helpful for you.
Final Thoughts
When you establish new habits, there are always going to be setbacks and mistakes. You may slip up and eat out too much or make that impulse buy you shouldn’t have. These things should not deter you from sticking to your goals. These slip-ups will happen to everyone and can require a conscious effort to fix.
Even not saving enough or you need to take time off from your budget plan should not deter you. Life happens, and sometimes that means you need to spend more for that month. That is okay, as long as you do not make it a habit. This may require extra thinking in the next month and require you to be extra vigilant about buying. But you just need to take things as they come.