by Jenny Smedra
I spend my entire work week online reading and writing about personal finance. Lately, I have browsed countless websites, discussion boards, and forums designed for people dealing with debt and bad spending habits. However, a post by a woman in Alaska highlighted a problem we all face. In her original post, the woman described her family’s current debts and sought advice and support. Before delving into the comments, I wondered how this could happen. How many other people were also in similar circumstances?
Identify the bad spending habits that got you here
Auto and vehicle loans
At first glance, I was overwhelmed by how much money they owed on auto and vehicle loans. Taken together, the remaining balances on her truck, van, RV, and Prius were approximately $ 98,000. That’s only about half of their debt! However, I knew there had to be more to the story. So I went over the comments to understand why such a highly indebted couple would take the load of so many vehicles.
Buy second hand to avoid expensive car payments
While most of the vehicles were necessities, there were some great points from other reviewers about the latest. The family bought the Prius for their side job delivering DoorDash. While finding ways to make more money is laudable, buying a new car seems counterproductive. It would be much more economical to buy a used car than to make an additional monthly car payment.
I have a feeling that many of us are falling victim to this consumer mentality. We feel the need to have the latest or the newest things, myself included. Although I’ve always wanted a new car, I had to be realistic and buy vehicles that fit my budget. Whenever I was tempted to look at new vehicles, my father would remind me that as soon as you drove them out of the parking lot, they depreciated.
If you can’t meet the monthly payments, the dealership will turn your loan over to a debt collection agency. In the worst case scenario, the vehicle could be repossessed, leaving you stranded and still in debt. Even if you do a voluntary take-back, you might still be paying for a vehicle that you don’t even own.
Credit card debt
The next piece of the puzzle that caught their eye was the overwhelming balance on their credit cards. After studying five figure credit card debt, I understand how easily credit card balances can be out of your control. The convenience of online shopping makes breaking bad spending habits even more difficult. It becomes difficult to resist temptation, especially when you feel like there is no way out. If I was so deeply in debt what would hurt a little more? However, loved ones reminded me that there is always hope. At that point, I contacted the debt relief program for a free consultation to get back on track.
Combating Credit Card Debt
The first step in tackling credit card debt is determining where you are spending your money. After realizing my bad spending habits (travel and transportation), I cut off those credit cards and switched to a bare-bones budget. It was an uncomfortable adjustment to say the least. I have sacrificed many comforts and indulgences for the cause. But I knew I had to stop digging if I was to climb out of my financial hole. In the end, I was able to pay off my credit card debt in less than two years. Thanks to strict self-discipline and a limited budget, I was finally debt free.
The Debt Avalanche Method
Now we cannot be sure what constitutes this family’s credit card debt. However, the excellent records with Best Buy and Apple suggest that electronics are the main culprit. While technology is expensive, the worst thing about credit cards is that they come with much higher interest rates too. Your Best Buy card has a whopping 27.24% rate!
If you are faced with multiple high-interest debts like this one, the debt avalanche method probably makes the most sense for you. Unlike the debt snowball, the debt avalanche method targets your debts with the highest interest rates first. After you have made all of your minimum payments, any remaining funds should be deposited on these cards. Paying off this debt first will save you more interest and lower your monthly payments over time.
How bad spending habits affect people around you
Including your partner
When reading the comment section, a pattern was very clear. The OP openly shared their efforts to get her husband on the same page. She explained how difficult it is to get him to stop using his credit cards and spend money they don’t have. From personal experience, this resistance creates tension in both your finances and your personal relationship. If you and your partner are not working towards the same goal, you are already fighting a losing battle. If you want to make progress in paying off your debt, you need to make sure that your priorities are aligned.
Setting an example for the next generation
One of my biggest concerns is the example I will set for the next generation. While I’m not a financial expert, I know that children watch their parents’ spending habits and learn from them. How we deal with money shapes their attitudes, behaviors and beliefs about their own finances. If we are unable to identify and correct our own bad spending habits, it increases the likelihood that our children will face the same challenges as well. That was enough motivation for me to break the cycle.
Even if you have good intentions, you need to budget and start executing. It’s a long, arduous journey, but you have to start somewhere. Even with six-figure debts, there is hope. You can start on the budget as a family and include children in some discussions. While they don’t need to know all the details, we can all use the support to stay on track and meet our financial goals.