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Anyone with debt probably has a long list
of excuses for why they have it.
It wasn't until I was in my late 20s
and fully analyzed my finances until I realized
I was six figures deep in debt that compounded over
the years, leaving me with very little room to breathe.
I, too, had excuses.
It was easy to get caught living in the present moment,
with little thought of how it would affect my future self.
The past three years trying to get myself out of debt
hasn't been easy, but I've identified
several toxic habits that led me to my financial demise.
By becoming aware of my behavior,
I was able to purge myself of these bad habits
and replace them with proactive ones
to prevent myself from regressing.
Number one, not having a budget.
Despite the simple concept of a budget,
I never thought that I needed one,
since I started working at 15 years old.
I thought I was in control, thinking
that, because of how little I earned,
there was no need to track where my money was going.
But it was like being on a ship and not
knowing there were several leaks until the ship was sinking.
Before the start of my financial journey in 2018,
I was part of the 30% of Americans who don't budget,
with no budget or any short or long-term goals.
I always thought that living paycheck to paycheck
was the norm and that big expenses could
be funded by credit cards.
But this thought process led me to a perpetual cycle
of getting into debt and paying it back,
only to rack up more debt.
Number two, "do it for the gram" mentality.
I was also addicted to Instagram,
finding inspo from influencers who traveled constantly
and posted beautiful content showcasing their adventures.
I'd browse through feeds for hours on a weekly basis,
peering into the lives I wanted for myself.
I was inspired to create perfectly curated feed
to depict my lifestyle that I really couldn't afford,
seeking validation for the sake of boosts and likes, comments,
and followers.
I followed a bunch of influencers and celebs,
and this left me feeling like I had
to buy into the hottest fashions and beauty trends
and travel to faraway places.
After spending thousands on non-essentials,
such as eating out, skin care, and travel,
I had further spiraled myself into debt.
Number three, using credit cards as an extension of my income.
I was approved for several credit cards
with attractive reward programs, and I
got into the habit of using those cards as if they
were an extension of my income.
I thought that meeting the minimum spend requirement
of a couple of thousand to be able to redeem rewards
could easily be paid back.
But credit card rewards aren't rewarding
if they lead to massive debt.
Financial experts strongly advise against doing this,
as individuals can easily rack up
large balances for the sake of reaping the rewards.
I became comfortable with the minimum monthly payments
because, at the time, it was affordable.
But this changed after a repeated
cycle of thoughtless spending and quickly escalated
to high credit card balances, and I was
paying hundreds in interest.
Number four, not having an emergency fund.
I also used credit cards as a funding source
for any emergencies, which is also what 37% of Americans
would do, according to a survey by Bankrate.
I had nothing saved for an emergency,
and I was also reaching my credit limit.
This method of funding became extremely costly
because I wasn't able to pay off my balance,
and the high-interest payments started to add up.
What's worse, if I lose my job, I'd
be in no position to be able to cover any of my expenses, which
left me anxious and in a vulnerable position.
Number five, prioritizing wants over needs.
Impulse buying was the root of my reckless spending.
I never gave much thought to prioritizing needs over
wants because I thought I could afford them all.
With no goals or a budget, I justified the things
I wanted if I felt the purchase was
increasing my quality of life.
If I'm going to take up running, I'd better get the best shoes,
no matter what the cost.
Or, I better travel now.
Life is too short.
I felt justified.
But this quickly spiraled into debt
that I thought could easily be paid back with future income.
Number six, overspending on my kid.
As a parent, I want to be able to give my son the world.
And part of this was the desire to give him the luxuries
that I didn't have growing up, especially when it came
to experiences such as travel.
In a survey by Credit Karma, 53% of parents
borrow money to pay for non-essential items
or experiences for kids.
Despite thinking I had the best intentions, the debt
I racked up because of this prevented me
from being able to save for an emergency or a college fund
and start investing.
Number seven, waiting to invest.
Speaking of investing, I always thought
that it was something for the rich
or that I needed to hire a broker
to even be able to start.
Although this might have been true back when
I was still going to college, it no longer applies today,
as investing has become much more affordable
and accessible within the last 10 years,
made possible through robo-advisors and mutual funds.
By blowing my money away on wants over needs
and racking up significant amounts of high-interest credit
card debt, I lost out on years of reaping
the benefits from the magic of compound interest.
If I could go back, I'd tell my younger self
to step back and think about how my spending choices will
limit what I'm able to do in the future.
Although getting caught up in all these bad habits
has set me back financially, I now
feel empowered in being able to take control of my outcome
and continue my journey towards financial independence.
It's taken a lot of self-discipline and awareness
to avoid these habits.
And by doing so, I was able to reach
two important milestones-- aggressively pay down
debt within the past two years and save an emergency
fund that's big enough to cover basic expenditures for at least
six months.