20 ways people accumulate debt

Modern life is full of subtle overspending traps. Debt can pile up for all kinds of reasons – poor communication with a partner or spouse, lack of organization in the kitchen, overdoing it on vacation – but luckily if you’re on the lookout for these Potential pitfalls, you I’ll be able to ward off with a little planning and creativity.

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Financial infidelity and hidden purchases

If a partner has a secret credit card or hide each other’s purchases, debts can pile up under the radar. Clear and consistent communication about money is key to keeping debt low and enjoying a healthy and honest marriage.

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Gambling

If betting has been a problem for you before (if you’ve ever played money you couldn’t afford to lose, for example), seek help for problem gambling is the first step to mastering debt. Gambling problems can quickly escalate into increasingly serious debt problems if the player thinks it is only one gamble away from getting rich. Let go of that kind of thinking and making the choice to stop gambling altogether is the only way to stop the financial bleeding and prevent future debts from accumulating.

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Not having enough savings

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Don’t have a budget

If you are not tracking your income and expenses, you will easily fall prey to the slow and almost imperceptible accumulation of debt in everyday life. Can you afford to go to the movies? This dinner with friends? This trip to the Caribbean? If you don’t really know because you’re not keeping a close eye on your money, you might say yes when, really, you should say no.

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Microsoft and its partners may be compensated if you purchase something through the links recommended in this article.

Make purchases by status search or peer pressure

Following the Joneses is a dangerous game for your personal finances. Equally rooted in psychology (low self-esteem and stress) As with poor financial management skills, making purchases to keep up with wealthy friends or neighbors can slowly wreak havoc on your financial life, get you in debt or dramatically reduce your retirement savings.

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Make impulsive spending decisions

Almost 90% of Americans say they made impulse spending decisions when shopping online. Whether it’s in the checkout line at the grocery store or browsing Instagram, smart marketing and merchandising makes us spend on items we didn’t plan to buy. Remember-if it’s not in your budget it’s an impulse buy. To avoid overspending and accumulating unnecessary consumer debt, think twice about whether those impulse buys are really worth it.

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Microsoft and its partners may be compensated if you purchase something through the links recommended in this article.

Excessive spending while on vacation

The average American household spends US $ 1,048 on holiday gifts. If it’s not in your budget, don’t spend it. Find other ways to deliver appropriate gifts by planning everything in detail and maybe even getting creative with barter networks or crafts.

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Not being adaptable

If you have experienced a job loss or unexpected drop in income, remember that your lifestyle must adapt if you want to avoid going into debt. Streamline your budget, make sure your friends and family know you will be going out less, and start planning to increase your income (whether through a new full-time job or a side activity or two).

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Don’t stick to a financial plan

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Don’t plan for big ticket items

Instead of racking up consumer debt every time you need to make a major purchase (like an appliance or an upgrade to your vehicle), plan well in advance and open an automated savings account.

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Have a balance on your credit card

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Not paying your bills on time

Most financial institutions impose penalties for late payments to invoices which, if incurred regularly without a plan to pay them, can lead to a build-up of debt.

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Transfer your credit card balance over and over again

Credit card balance transfers come with a number of hidden dangersincluding the interest rate you may be charged after the introductory annual percentage rate (APR) expires. If you plan to use balance transfers as part of your debt reduction strategy, pay special attention to all terms and conditions and make sure you can afford the balance transfer fee.

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Make too many cash advances

Unlike the usual charges on your credit card, which start to accrue interest at the end of the month when you take out a cash advance interest charges are applied immediately. There are also usually fees involved. Use cash advances sparingly, especially if you don’t have the money to cover them right away, to avoid unnecessary debt.

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Have no rules or limits on the use of credit cards

Credit cards are incredibly handy tools, when used correctly. But a lot of people use them irresponsibly and go into debt, which is why some personal finance experts advise cut up credit cards for real. If you still plan to use them, for travel rewards or other reasons, it helps to apply a set of personal rules to your use of credit card.

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Microsoft and its partners may be compensated if you purchase something through the links recommended in this article.

Disregard inflation in your budget

Remember that the the cost of living increases every year, so change your budget regularly to keep pace with inflation. Failure to do so could mean that your budget is no longer realistic, which could cause you to spend on credit cards and get into debt.

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