Half a year ago I felt I had to reorganize my finances to stay sane. I looked at my accounts and calculated how much I owed altogether. I wasn’t a fan of the final number!
After seeing my debt combined, I had to find out where my money was going and what I was doing wrong. It’s a good idea to delve into your account history to discover exactly where you’re spending your money. After my account history, I researched the causes of debt and talked to family about their spending habits. I’ve boiled it down to six of the most common reasons you’re broke.
1. Not checking your credit score.
Your credit score determines many things that you do in life. You will notice how often your credit is checked as you make larger purchases (or attempt to). If you want to open a new credit card account, lease a car, buy a house, etc., your credit will be checked and it will be a determining factor when companies are deciding whether or not to lend you money.
2. Not knowing how much you net
It’s important to know exactly what you’re bringing in each month. Keeping track of your finances includes knowing what you make, not just what you’re spending. If you’re trying to pay off your debt you don’t want to spend more than you have, and you want to put most of your paycheck towards paying off those bills! If you’re not in debt, knowing your net worth and spending only what you have, will keep you out of debt. Advice: Know what you make and don’t spend more than you have.
3. Not tracking what you have on autopay
It’s easy to have just about everything completed automatically, including your bills. The problem with automatic payments is that it’s easy to forget everything you have coming out of your bank account or being charged to your credit cards. Using one account to pay for all of these types of charges will make it easier to track everything and notice when costs rise.
4. Not paying attention to where you’re spending your money
It is imperative to know where your money is going. Along with tracking what you have on autopay, you should take note of your purchasing habits. You may find that you purchase a significant amount of a certain item. If so, you can look for it when you shop at your favorite wholesale store. This saves us a lot of money!
5. Not reading notifications from financial institutions you use
Banking and credit card institutions will often make changes to the terms of service they provide to you. They will notify you of changes to your account via messages in the inboxes on their websites and apps. Notifications won’t always make it to your personal email. Check the settings of each of your accounts to activate the option to have messages sent straight to your personal email. If you don’t want these notifications in your everyday inbox, you will need to be diligent in checking each accounts’ message center.
6. Not creating a budget
Creating a budget provides you with a structure for spending. No matter what you tell yourself, it’s not easy to make the right decisions when you’re out and about doing fun things with your friends or when you happen to walk by that shop with the perfect winter coat in the window. When you decide on a reasonable budget and commit to sticking to it, it’s much more simple to say no before swiping that credit card or handing over your cash.
Do you know your biggest causes of debt? What contributes to your debt?