3582: Good Financial Habits You Learn from Being in Debt by Good Nelly with HelloBrownlow on Lessons From Debt

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[00:00:30] This is Optimal Finance Daily. Good Financial Habits You Learn from Being in Debt by Good Nelly with HelloBrownlow.com. Being in debt is perhaps the best way of breaking bad financial habits. When you're in debt, you realize what led you to this. However, you should follow good financial habits even after being debt free. Here are a few good financial habits you learn when you repay debt.

[00:00:57] Number one, track your every dollar and learn the actual value of it. If you don't track every dollar, a few dollars can disappear suddenly without you even noticing it. You'll have no idea where you're spending more. When you try to pay off debt, every cent counts. So you develop the habit of tracking each and every dollar you earn. You realize the importance of a $10 note since it can help you make a minimum monthly payment on a credit card. This way, you also become grateful for every dollar you earn.

[00:01:26] Every cent you earn. And you understand the real value of money. Number two, plan a suitable budget and revisit it from time to time. Budgeting is the basic step in financial planning. It helps you to check where your money's going.

[00:01:41] You shouldn't have an alibi for not having a proper budget. Yes, it takes time to plan a suitable budget, but you need to do that even if you need to devote time. Also, planning a budget is not a one-time task. You need to revisit it and modify it if required. Number three, learn the value of saving money on little things.

[00:02:02] Tell me, if you're not in debt, will you think about whether or not a monthly subscription of $40 or $50 is worth it? No. When you're in debt, you actually count cents because all that matters for you is to save as much as you can and repay the outstanding debt amount. This is when you start practicing frugal living, cancel memberships, which you can do without, and start looking for extra income opportunities. So give it a thought. If you continue practicing these habits even after paying back debt, you'll be able to secure your financial future.

[00:02:32] This way, you can lead the life you truly want to live. Number four, make a list before going shopping. You're bound to spend more when you go shopping without a list with you. The discount items will entice you when you go grocery shopping. But what's the purpose of spending even a dollar if you don't need it? So always have a list when you go shopping. It's a good practice to have a list even when you visit the shopping malls. It's not a good financial habit to visit shopping malls to spend your leisure time.

[00:03:02] Meet your friends elsewhere. Number five, stop impulse buying and focus on needs. This is actually a continuation of a good financial habit discussed in the previous point. Before buying anything, ask yourself, do you really need it? When you're buying a big ticket item, give two to three days before you decide that you'll buy it. Most times, you won't feel the urge to buy that item.

[00:03:25] Just as a person remains focused when paying back debts, you should maintain the habit of distinguishing between needs and wants. Doing so, you can spend on the items you really need. Number six, stop thinking about what others think of your financial management strategies. Does it really matter what people think of you? Very few people will offer you help when you're struggling to repay debt, so you shouldn't spend to please others.

[00:03:51] If you're practicing a frugal lifestyle and you've decided not to eat out on weekdays, don't agree if your friends compel you to do so. If they're real friends, they'll support your decision instead of compelling you. However, sometimes you can decide otherwise, but it should be your sole decision and not due to the pressure of your peer group. Number seven, don't use credit cards for each and every purchase. Credit cards help you to have a good credit score.

[00:04:18] However, one of the bad financial habits to avoid is using credit cards, even if you can repay the balance at every billing cycle. When you fall in debt, you tend to avoid using credit cards for every purchase since it's easier to have control over your money when you spend real money. However, don't cancel your credit cards and use them sparingly. And make a point to pay the entire balance at every billing cycle to avoid interest on the charged amount. And number eight, debt support is more widespread than you think.

[00:04:48] When we get into debt, we learn pretty quickly about our spending habits and that we should have cut back when we had the chance. But when it's hurt us so much that we consider filing for bankruptcy, it's possible to get the right support so you aren't completely bled dry by the process. Whether it's filing a consumer proposal so that you don't lose your assets or a deal is struck with certain creditors, having personal debt support can arm you with the facts to get out of debt with your sense of self intact.

[00:05:16] But it also makes you realize that if this cycle repeats itself, you can find the support you need. Following good financial habits is not enough. It's also your responsibility to teach your children about strong financial habits so that they can distinguish a good financial habit from a bad financial habit. Doing so, they'll be able to stay away from bad debts and can manage good debts effectively. In turn, they won't have to look for how to be debt free as they won't experience debt problems.

[00:05:44] So start teaching our kids from a young age so that they become efficient money managers when they grow up. You just listened to the post titled, Good Financial Habits You Learn From Being In Debt by Good Nelly with HelloBrownload.com. Summer's almost here and I've been daydreaming about our next vacation, not stressing about whether we can afford it.

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[00:07:34] I'm not sure I agree that being in debt is a good way to break bad financial habits. From what I can see, we live in a culture that normalizes debt. Many people believe that debt is like death and taxes. It's simply unavoidable. While I do think most of us have to experience some financial pain before we wake up and take responsibility for our financial future, this does not guarantee that we'll actually learn the lesson.

[00:08:03] A Fortune article said, quote, 37% of Americans lack enough money to cover a $400 emergency expense. That means nearly one in four consumers would have to use credit, turn to family, sell assets, or get a loan in order to cover any major unexpected costs. And when asked about non-emergency expenses, 18% of Americans said the largest expense they could cover using only their savings was under $100.

[00:08:33] End quote. I think one needs to have a deep mindset shift in order to challenge the cultural norm of immediate gratification, mindless spending, and robbing Peter to pay Paul. One has to desire all the things that money can buy aside from stuff and respect money as a very powerful tool.

[00:08:54] For me, it all started with running my credit report and accepting the fact that I was in $30,000 of debt simply because I wasn't paying attention. I got really interested in increasing my financial literacy and growing the gap between my income and expenses. I also strengthened my newfound belief that it's not only possible to become debt-free, but it's also possible to enjoy the process. And that should do it for today.

[00:09:22] Have a happy rest of your day, and I'll see you on the Thursday show tomorrow, where optimal life awaits.