One look at Paula Thompson in California and her contemporaries would wonder how she could manage the upscale fashion wear, the swanky new set of wheels, and the new house she had got after just a year into her first job. Paula is in fact, a growing list of millennials who do not mind spending more than their income capacity. As a result, they end up staring at a vortex of debt that can ruin their mental and financial wellness.
While we don’t say that you need to live in absolute penury, you can slash down on a lot of unwanted expenses and still lead a contented life. By controlling your spending, you can ensure that you remain debt-free and stay away from the debt trap. And to achieve this dream goal of financial freedom, you need to build habits that can be implemented every single day to lead you to a debt-free life.
Want to know what habits you can focus on to lead a zero-debt lifestyle? Then read on and be aware of these 6 crucial habits needed to repay your debt and stay away from the debt trap:
1 – Family support
First off, you need complete support from your loved ones, so that you can remain committed to a debt-free lifestyle. Imagine the scenario if you are making all the efforts to control spending, while your loved one indulges in retail therapy every second day?
The entire household must be on the same page in order to reap the benefit of financial discipline. While it may look difficult, they will thank you later for your financial acumen and long-term vision.
2 – Fun activities
Spending on fun activities and entertainment have definitely come down after the recession of 2009. However, this category is still the biggest culprit for improper financial discipline. Did you know that the average American spent $2,504 per person per year as per a U.S. Bureau of Labor Statistics report? We recommend two strategies here:
- Cutting down on the occurrences of going out for movies, drinks, or fun activities
- Replacing it with other option. For example, renting a movie instead of going out the theatres, or cooking instead of dining out every now and then, can help
3 – Tobacco smoking
The increasing taxes on tobacco and cigarette smoking make the habit increasingly expensive with every passing year. Also, consider the healthcare costs implications due to smoking, a Reuters article states that almost 9% of the total healthcare costs are borne towards the treatment for smoking-related issues. This is a double whammy – the costs of buying the cigarettes, and the cost of treatment for illnesses arising due to smoking it.
We don’t say that you have complete give up smoking. However, you can take concrete steps to curb tobacco addiction. One way to do this is transitioning from tobacco smoking to e-cigarettes. There are several reasons that make the switch to vaping worth it. Not only do they contain zero tobacco, but also helps in getting over from the nicotine addiction as e-liquid used in it are available with or without nicotine strength.
4 – Unwanted gift-giving
People may have a habit of giving away gifts for every occasion. Some gifts may be actually required to build a strong relationship and may be considered thoughtful. But for other reasons where it can be avoided, gift-giving needs to be curbed. Think about it, the money saved can be used to pay off the debt which will be a great gift – to yourself.
5 – Restaurant meals
Just like entertainment activities, dining out is also a major expense that takes a toll on your financial health. Ordering food over the weekend, or going out once or twice a month would sound prudent. However, taking off from work and heading to the nearest bar every second day would be a bit too much. Plus, there is one more issue – with small portions served, you don’t get as much value for money as with home-cooked food.
It makes sense to put a limit on these outings, especially when the financial situation is precarious and you are exploring ways to get out of the debt trap. Home-cooked food is almost always more inexpensive than restaurant food (after considering the bills, the taxes, and the tips).
6 – Enjoy now pay later
This attitude of instant gratification is just what is drawing the millennials towards debt. Rather than waiting for the right time to buy, we want everything right now. People simply see an advertisement online or on the TV, and make up their mind to buy it, irrespective of whether they actually need it or no. As a result, the spending misaligns with income and our capacity. This is where credit cards come in and take the person further down the debt spiral.
It is important to inculcate the habit of sacrificing the enjoyment of present-day so that your future remains secure. Say no to debt by letting go of unwanted holidays, excess hoarding of jewellery, shoes, apparels, watches, or buying electronics that you simply don’t need.
Here it is extremely important to figure out the difference between ‘needs’ and ‘wants’. The first term is an absolutely essential need that has to be met, while the second term is for something that is optional and can wait. The key to financial discipline is to stay away from the ‘wants’.
As one of the world’s richest people, Warren Buffet once said – “If you buy things you do not need, soon you will have to sell things you need.”
To sign off
After a few years of dedicated commitment to these factors, you will see that your debt levels go down along with an increase in disciplined spending, and a better likelihood of wealth creation over the long term.
Which of these habits will you inculcate into your daily life to get out of the debt trap? Do write to us and let us know your thoughts in the comments below.