Donell Edwards, Blogger
About Donell Edwards: Donell Edwards is President of CWR Media and is also founder and publisher of The College World Reporter (CWR) magazine and CWR World News & Information Service. He is also a professional speaker, freelance writer, and entrepreneur.
Know Your Money
Thursday – May 8, 2014
Knowing Your Personal Finances
KYM Special Series: The Debt Factor – Causes and Cures
By Donell Edwards
Today we discuss more causes of getting deeply into debt, as well as some of the cures. In my post on Monday, How Did I Get All This Debt?, I referred to an article written by Christina Lavingia, 10 Reasons Why You’re Still Living Paycheck to Paycheck. Here is the list of reasons from that article:
- Paying the minimum on debts
- Trying to keep up with others (the proverbial Joneses)
- Failure to plan for irregular expenses
- Failure to plan. Period.
- Not realizing how handy you are or can be
- Spending impulsively
- Paying for unused memberships
- Avoiding bank account and credit card statements
- Viewing your credit limit as an asset rather than a liability
- Failure to think like an investor
This list includes many of the major causes of people getting deeply into debt. Today, we look at similar list for comparison from our Must Read for today, 10 Reasons You’re Still Broke, from Kiplinger online written by Cameron Huddleston, shown below:
- Failure to attend or complete college
- Trying to keep up with the Joneses
- Poor work ethic
- Bad habits that are costly: Smoking and drinking too much
- Impulse buying
- Playing the lottery; gambling
- Making minimum payments
- Lack of goals
- Hanging out with the wrong crowd; they have bad habits too
- Being a couch potato; mismanagement of time
When these two lists are compared, surprisingly, there are only three items included on both lists: (1.) Paying the minimum on debts, (2.) Trying to keep up with the Joneses, and (3.) Spending impulsively. So, what this helps us appreciate is that there are many factors that contribute to a person getting deeply into debt. The Kiplinger article is very well written and is a short easy to read article that I strongly suggest that you read. So, I am not going to say much about it other than some of the things included on the list are really noteworthy. Those are the importance of a college education or post secondary training, poor work ethic, bad and costly habits, gambling and playing the lottery, and hanging out with the wrong crowd.
If you take a close look at both lists it becomes obvious that a major cause of getting deeply into debt is lack of attention to spending. That is why in The Know Your Money Personal Money Management Plan we spend so much time discussing carefully and regularly monitoring spending, evaluating spending, and learning to eliminate wasteful spending.
Most of the related points on these lists, like paying the minimum on debts, avoiding bank accounts and credit card statements, viewing your credit line as an asset rather than a liability, failing to plan, trying to keep up with the Joneses, bad habits that are costly, and playing the lottery and gambling are all indirectly the result of poor spending habits.
Take a real close look at both of the lists above and see if any of the things listed describes you. If you are deeply in debt or you are headed in that direction, the first thing you must do is examine how you are managing your personal finances. These lists are a start that can be used as a guide to help you identify self-destructive behavior on your part, and help you recognize that you need to change. But, that is up to you. If you are drowning in a the sea of debt and someone throws you a lifeline and you refuse to reach for it, who is to blame if you drown. Suffocating in debt is no fun, and it is possible to get out from under that burden, but it takes an individual’s willingness and commitment to make the sacrifices that are necessary to get out of debt. You should start by eliminating any of the practices listed above that apply to you and learning to engage in activities that enhance your personal finances.
Another related cause of out uncontrolled debt which we also talk about a lot is credit cards. In our other Must Read for today, The Dangers of Credit Cards, by Jon Dunlin from Money$martGuides, Mr. Dulin discusses an interesting concept to help avoid wasteful spending and to help prevent getting deeply in debt, that is The Envelope Budget System. This is a very interesting article and if you are addicted to credit cards or just would like to learn about a helpful alternative budget system this is a great article to read.
10 Reasons You’re Still Broke
The Dangers of Credit Cards
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Disclaimer: I have a Bachelor of Business Administration degree but I am not a financial adviser. However, I have acquired years of knowledge about personal money management through my life experience working through my own personal finances that allows me to share that knowledge with readers of Know Your Money. The Know Your Money Blog posts written by me are my own common sense observations and opinions and are for informational use only. Although my blog includes contributions from experienced financial professionals, please make your own financial decisions based on personal research or contact a financial adviser.
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