When we have lots of debt, we often blame it to unfortunate life incidents or major financial moves such as buying a new home or starting a new business, and rationalize them being “good debts”. Many of us don’t realize though, that often it is our own lifestyle and attitude towards money that get us into debt troubles. Here are some of the most common causes.
1. Moving to an Expensive Home or Flat
Reaching certain milestones of our life – such as graduating from college, getting married, or getting that big promotion – often prompt us to move to a new home, sometimes even to a new town or city. While there’s nothing wrong with “upgrading” your place of dwelling and lifestyle, you need to ask yourself whether you can afford the new home or the costs of living within the new city you decide to spend a big part of your life on.
You may be thrilled with the whole idea of starting fresh, but it can give you a lot of future headaches if you fail to gauge your affordability right now.
2. Buying a Car that You Don’t Need
Most of us definitely need a car, but not everyone. Perhaps if the places you frequent are easily accessible by public transport or other means, then you should think twice about making that big purchase.
There could be many benefits associated with not having your own car, in fact. Not only can you save money on the vehicle purchase itself, but on other expenses associated with driving as well, such as insurance, taxes, and fuel. Using the bus or subway may be more economical and environment-friendly, not to mention that you don’t feel obliged to drive when you’re feeling tired, and avoid traffic by using the train. You can also cycle or walk short distances if you feel up for some exercise.
3. Going on Holidays You Can’t Afford
Getting on trips, whether local or abroad, is an excellent way to unwind and bring back your productivity. Work burnt-out is one of the hardest things to combat, and you need to take regular breaks in order to keep your physical and mental health in tip-top shape. However, taking out a loan or using up all your savings on expensive holidays will do more harm than good.
They say travelling is only for the rich, but we beg to disagree. While you do need to stash a substantial amount of cash for your vacation plans, you can do this without breaking the bank. And even if your intentions for travel are good, you run the risk of getting into bad debt problems if you do not prioritize accordingly.
4. Putting Your Entire Savings on Your Wedding
Getting married is definitely one of, if not the grandest thing that can happen to your life. It’s a once in a lifetime experience that you would want to celebrate, but believe it or not, having a grand wedding is not the key to a fruitful marriage. Spending everything you’ve worked for on your wedding day is as good as burning cash, and you’ll find it harder to adjust to married life if you’re adding your finances to the list of problems that you are soon going to face.
Cut down the number of guests if you can, and minimize the expenses on every little aspect – from venue, food, down to souvenirs. Forget the splendid gimmicks that you don’t need. You’ll actually be surprised at how limiting your guest count not only makes everything much simpler and cost-efficient, but it makes the whole vow more solemn as well.
5. Making Unwise Investment Risks
Spending your cash on some investments is a wise thing to do, but you need to be very picky and careful when it comes to your portfolio. People often think that when you’ve saved some money, you just have to invest it, and then you can sit back, relax, and watch your money grow. Unfortunately, that is simply not the case. For some people hoping to enjoy a prosperous, early retirement, they end up finding themselves broke instead, or worse, in debt.
Whenever you make an investment, there will ALWAYS be a risk involved, no matter how low. There’s no foolproof way to get around with this, and there’s no guarantee that you will make gains, let alone get your money back. Successful investors spend years studying the volatile market, and even the most experienced of them can sometimes suffer losses. Don’t jump in a business or investment plan that you have no prior experience of without thinking or seeking advice from the experts if you want to protect your hard-earned money. Additionally, NEVER put all your cash in one pot.