Nobody really wants to be in debt, but the lucrative power behind the idea of borrowing an amount that you’d pay back in the future can be huge. Several people fall for this. Confident in themselves and their ability to pay back a loan or even multiple, some do so to be able to “live in the moment”.
But is this really a smart thing to do? Do you need to saddle yourself with debts to be repaid in the future, just so you can enjoy some form of material satisfaction today? It just doesn’t make sense.
In fact, as of January 2019, the household debt per person in India stood at Rs. 16,239, with a majority of the amount (54.2% of the total) being represented by home loans. This number is the result of tremendous growth, for just in 2015, the number stood at Rs. 9,017.
Why do so many people always end up in debt, and more importantly, why are they unable to free themselves of it? The answer to this isn’t difficult to find. It’s merely a question of your mindset towards your finances.
So let’s dive in and see what you could be doing wrong, and how you can make small changes to go far.
1. Choosing Wants Over Needs
People often step out to the mall, theatre, or even to the supermarket, picking up things they’d like to have but don’t really need. It could be a cardigan to match their navy trousers or a bottle of organic mayo to probably use in a burger. Purchasing these products often becomes an action that you hardly give a second thought to.
What makes this more of a debt trap are credit cards. Imagine that you don’t have enough money to buy that cardigan and comfortably pay for your month’s expenses, but what you do have is a credit card. Voila, there’s the solution to your problem.
Your first instinct is to think that you don’t have to pay for the cardigan or other items on your list right now. You can deal with the payments later – you would only have to pay a little more on your credit card bill. But the reality isn’t as simple as we’re making it out to be.
See, if you’re the kind of person who’s swiped their credit card knowing fully well that they can’t afford that extra purchase at that point in time, you’re most likely to do this every time you’re out on the town. Be it an extra cup of coffee while impatiently waiting for your date to arrive or that impromptu drinking plan with your colleagues after work.
All these little instances that might not seem like a burden now add up to a pretty hefty amount when you’re paying your bills.
A change of mindset and self-control is the solution. The next time you step out, make a grocery list, and stick to it. Refrain from buying things you don’t need – this will save you a great deal of money and enable you to pay off your debts as early as possible.
2. Convincing Yourself That You Deserve the Extra Expenditure
Often, when buying something they don’t really need, people try to convince themselves by saying that they deserve it. It could be that cardigan we previously talked about or that fancy meal at a restaurant on the weekend. Sometimes, it even extends to bigger purchases such as a new phone, laptop, and sometimes even a new vehicle.
Given the times we live in, there are a million ways for you to divide these payments into installments, which you use to tell yourself that you can afford to make that purchase.
The problem with this approach of “deserving” every expense is that it again translates into an endless cycle. It can lead to stress and even regret when you realize what it means to give away a massive chunk of your monthly income towards something you didn’t need.
3. Keeping up Social Appearances
Societal pressure to keep up appearances is admittedly quite burdensome. Despite acknowledging that the idea of your acceptance is directly linked to your economic status is very shallow, you often find that you’ve fallen slave to it. And that’s understandable because it happens to the best of us.
However, when in debt, you must prioritize it and work towards repaying it. Don’t think short-term. Instead, if money gives you a great deal of satisfaction, work towards ridding yourself of any present debt and work, save, and invest smartly, so you never have to worry about money again.
For many, this will involve an end to being lazy and finding a second source of income, but trust us when we say that this isn’t something you’ll regret.
While a second source of income will make it easier to pay off your debts, it can also be a great investment in your portfolio. Think of it as picking up a new skill, or using your existing skills to actually make yourself some money.
4. You’re Spending More Than You Should on Services
If you’re working hard to get rid of your debt but wondering how, consider taking a look at how much you’re spending on your electricity bills, internet, laundry, etc.
Chances are you often forget to turn off the lights when you leave a room. It seems harmless, but again, so does every purchase at that instant. It’s only when you need to pay up these bills that you realize how much you actually could’ve saved.
On the other hand, if you aren’t working hard to repay your debts, you should start right away. Chances are, you’re spending a great deal of time binging on a show or playing a ton of online games. Make a resolution to cut down on these activities and use that time to make some money on the side.
It’ll keep you engaged, and with time, you’ll realize that you don’t need the amount of data you’re paying for. This is when you downgrade your monthly subscriptions and save yourself some more money.
5. You Haven’t Created a Monthly Budget for Yourself
At the core of any attempt to comfortably pay off your debts as soon as possible is planning. And it’s likely you aren’t doing any. Planning your finances and monthly budget is the best way to set a limit for your expenses.
Map out how much it costs for you to purchase your food, pay for services like your internet and electricity apart from any other subscriptions and commitments. Go through your lists and get rid of anything you don’t need. If you need to think twice about it, you probably don’t need it.
Try not to stray away from what you’ve planned, but don’t restrict yourself in times of genuine need, either; a budget can always be altered a little if needed.
You might ask, what’s in it for you? Well, aside from being able to pay off your debts much earlier than you otherwise would, you can treat it like you do when picking up a good habit. Every month that you manage to stick to your budget, treat yourself to a good meal.
Don’t go overboard, but let this serve as a reward for your commitment. In a few months, you’ll realize how beneficial just a little bit of self-control can be.
By this time, if you’re feeling overwhelmed about paying off your debts, don’t be. While owing money can certainly be stressful, remember that you have the power to navigate through this. Effective budgeting is key, along with just a little bit of self-control.
Simple changes to the way you look at money can go a long way in eliminating any current debt and securing a comfortable and financially stable future for yourself and your loved ones.
At the end of this article, sit down and spend some time with your thoughts. Think about the times you made impulsive purchases and come to terms with them. Take a walk around your house, go through your kitchen, and come up with a list of regular purchases. Use this to create a budget for yourself and commit to it.
A recipe of determination, hard work, and self-control can go a long way in helping you become debt-free and in control of a bright future. Cheers!