Money may be a means to an end, but it is still important for you to lead a peaceful life. For that very reason, it is important for you to manage your money well to be able to meet your financial responsibilities and go about life as planned. What most of us do not realise about money management is that it may be our own mindset dragging us down.
Here are five instances of how your mindsets can lead you on to a dark alley of debt and it may only be a matter of time when you find yourself on that loan defaulter list.
Imagine this. You have just landed up with a decent job that offers you a decent salary package. You start off well knowing that paying off your student loan will be no trouble. Then come the office parties, the visits to pubs and lounges and the girl you want to impress. The next thing you know is that you are exhausting a chunk of your salary on unplanned expenses, and soon find yourself in a position, when you are unable to pay off your student loan instalments.
What to do: While avoiding every office party may not be possible, be uprfront with colleagues or friends whom you trust and come clean about your priorities to save money and paying off timely debt.
In what may have been a short career span you may have done really well for yourself where you not only have a pay packet that is more than sufficient, but have even managed to take a home loan and no live under a roof you can call your own. While things fine for a while, the constant accolades may bring in cheer and you find yourself celebrating much too often. Your credit card outstanding remains unpaid for a month, and you tell yourself you will put things right back on track. Before you know it, your credit card debt keeps mounting and you find yourself in a debt trap, when you are barely able to pay off your mortgage.
What to do: Do not put yourself in a position when you have to choose between your credit card bills and your home loan. Budget your expenses and make loan and credit card repayments a priority.
Anecdotal evidence proves the fact that 90% of have some or the other finance related regret. Maybe, it’s the chit fund you invested in under the influence of a peer group or a stock you bought based on a hot tip. This causes both guilt and regret that may pull you into an abyss of bad decisions regarding debt too. The consequences of this may be as severe as landing up on the loan defaulter list.
What to do: Do not beat yourself up about mistakes in the past. Instead treat them as lessons and move in. While opting for any debt, ensure that you have the capability to make timely repayments.
This is another mindset that is dangerous for borrowers. While it is true that credit is available easily in the modern day, you do not have to go about biting more than you can chew. Besides applying for too much credit, will have a negative impact on your credit score.
What to do: Apply for credit only when you are in real need of the same. If you do opt for a line of credit, make sure you have the capability to make timely repayments.
There is indeed no knowing when life will throw a curveball at you. The best thing to do thus is to be prepared for financial emergencies. When you are repaying debt, it is mandatory to build a contingency fund to take care of loan repayments as well if you cash flows come to a sudden halt.
What to do: Consider building an emergency fund that will take care of your loan repayments and other expenses for a period of at least six months till you are able to get back on your feet and your normal cash flows resume.
Thus, as is evident, more often than not, it is our own mindset that holds us back with regards to financial matters.