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10 Reasons You’re in Debt (And What to Do to Get Out of It)

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Right Down the Money Funnel

Now, when I say you, I really mean me, so don’t take this as some kind of angry judgement on your (my) terrible spending habits.  I’ve made many mistakes and I am just barely figuring it out, so allow me to analyze a few reasons why you’re (I’m) in this boat…

10 Reasons You’re in Debt (And What to Do to Get Out of It)

1. You Spend Like You’re Rich.  Wow, have I been there.  I almost think my credit cards encouraged violent spending (note to self: trademark the term “violent spending”).  I used to be amused at ridiculous bar tabs and buying designer pants.  If I was spending less than I earned, then there’s nothing necessarily bad about buying designer pants or eating at every fancy restaurant in the city.  But it is a problem if your income doesn’t support that lifestyle.  Eventually, you have to put away some of those expensive tastes until you can afford them, which means you can afford them while still saving and investing 10% or more of your income.

2. You Have a Vice that’s Gone Unchecked.  Is it gambling, drugs or alcohol, shopping, or maybe something freaky, like a silicone doll collection?  Whatever it is, there are obviously some issues you have to deal with, but maybe just as important is the fact that that vice takes up a portion of your income that could be going elsewhere.  There’s obvious ones like cigarettes, but there’s also less obvious stuff like buying shoes every week at TJ Maxx because they’re only $12.99 and that shouldn’t even count.

3. You Buy Stuff You Think Will Impress Other People.  Case in Point: BMW 3-Series.  Enough said.

4. You Think You’re Going To Make It Big With Zero Planning.  I know that you’re talented and smart.  You are probably working on a few things to move your career along.  You should have the same kind of plan with your finances and investments.  What would you like to save each month?  How much additional debt payments can you make each month? What would you like to invest in in the future?  Start researching those things you might be interested in and just learn as much as you can.  Talk to people who invest.  DON’T follow their advice.  Just learn from them and observe their methods.  They could be totally wrong, but you will still be learning more about the markets, not to mention people’s irrational trading strategies.

5. You Have Never Made a Monthly Budget.  If you’re anything like me, the idea of a budget seems unnecessary at first suggestion.  You already know how much you make each month and you know when your bills are due, and if there’s anything left over, you’ll pay your debt or put it in savings.  Well, the budget reinforces everything.  It shows you exactly where you’re spending your money, and you can compare your spending to your income (Hint: Spending should be < Income).  A budget is like a mini New Year’s resolution, you have good intentions and you may or may not stick with it 100%.  But since you will keep making a new budget every month, your budget will slowly begin to reflect more of reality and you’ll feel more confident with each month.

6. You Don’t Look at the Price.  This can be a killer at the grocery store.  Food prices vary from chain to chain (one place has cheap produce, expensive personal care items, the other place has cheap meat and expensive produce, etc).  Consider the price of items and hold off on an item if you can when it’s not on sale.  If it’s at the mall, look for the price, ask if there’s a sale coming up, or consider reason #7…

7. You Don’t Ask for A Better Deal.  This one is so easy and anyone can do it.  Negotiating is an art, and not everyone is comfortable with it, but you owe it to yourself to just start trying it, and you might even decide you like it.  Here’s the rule: Never accept the first price on anything where the price is not on a price tag (or even if it is on a price tag when the price is over $300).  You don’t have to be rude or demanding, it’s just a question: Can you do anything better for me?  Is that your lowest price?  What’s the Good-looking Chick Discount? (The last one may not work for everyone).  If you’re buying something online, you should always do a quick Google search for coupon codes for the store or check RetailMeNot.  What about Craigslist? Did you check it?  This is the only area of financial matters I’ve always excelled at, so I’ve probably tried everything you can think of.

8. You Think More About How to Spend Money VS. How to Earn It.  It actually doesn’t take any special skill to spend money.  I KNOW.  It’s shocking.  Has anyone told Paris Hilton this?  The point is that anyone can walk into Louis Vuitton and buy a $5,000 purse.  But figuring out a way to (legally) earn money by creating a product, offering a service or some other way of making money takes time and skill to develop.  I tend to spend a lot of time thinking about how I would like to spend money (I just need a Canon 60D and new set of living room furniture), but I am slowly letting those go and focusing on things (this blog, investing, etc) that will earn money for me.

9.  You Aren’t Prepared for Emergencies.  Last year, my boyfriend and I found a charming little guest house for rent in a nice part of LA with all utilities included for $1,000 per month.  The landlord was so nice.  We met his kids, he invited us over just to hang out and talk while the kids did their homework and tried to join the conversation.  He totally didn’t mind that we didn’t need to move in for 2 months.  We gave him our $1,000 security deposit and planned to call him as the move-in date got closer.  Well, it turned out he also accepted the security deposits of ten other people, who were also planning to move in within a couple of months and the house wasn’t his but a lady’s whom he was housesitting for.  He ended up being arrested, serving three months in jail for fraud, and then being deported to Austria without ever paying back the $1,000 judgement the DA had awarded us.  So we were out $1,000 and had to find a new place to live in about 10 days.  Crazy stuff happens.  It’s good to have a cash reserve.  Start putting aside just a little bit of money into a separate banking account, even while you’re paying off debt.

10. You Don’t Look at Your Bills/Statements.  I get a little depressed thinking about how much I am paying in interest fees each month.  But I still look at my statements and keep track of balances and due dates with written reminders.  At the end of the day, money isn’t real, it’s just a tool we’ve created as humans to make different moves in this society game.  But it’s still more fun to win the game, so staying on top of your bills and statements means you are taking the first step towards winning the game…

Want more lists about bad money habits?  Keep reading:

10 Reasons You Aren’t Rich

10 (More) Reasons You’re Not Rich

25 Traits of the Not So Well To Do 

Got any more bad habits?  I would love to hear them!

Advice from Noam Chomsky

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Noam Chomsky

“Don’t take assumptions for granted. Begin by taking a skeptical attitude toward anything that is conventional wisdom. Make it justify itself. It usually can’t. Be willing to ask questions about what is taken for granted. Try to think things through for yourself. There is plenty of information. You have got to learn how to judge, evaluate, and compare it with other things. You have to take some things on trust or you can’t survive. But if there is something significant and important, don’t take it on trust.”

(Excerpt from Death of the Liberal Class by Chris Hedges)

 

 

The Consumer Financial Protection Bureau: What Does It Mean For You? (Not Much)

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Hmm, nice little graphic. There goes $50K of the CFPB budget.

OK, so having overhyped Carmageddon last week, it’s time to talk about a serious and relevant topic, the new Consumer Financial Protection Bureau.  I don’t need to say a whole lot on this topic, since this article explores some of the possible potential of the Bureau and this article reminds us that it will all probably end up being nothing but a lot of talk and watered-down “initiatives” and reform.  The main point I want to make is that by the time some event/trend/whatever has reached the point where it needs a federal bureau to look into it, that means there are definitely big problems with it and that the new bureau is not going to be able to do much to stop a tidal wave of activity (Example: FBI.  Catches lots of criminals every year but do you think that means they’ve stopped the flow of counterfeit cigarettes or whatever else into the country? NOT ONE BIT).

So when we talk about a Consumer Financial Protection Bureau, the government is basically telling you there is no consumer financial protection in the United States, they had an “Oh, sh*t” moment and are frantically trying to put a friendly face on a HUGE issue with no easy answers.   As the second New York Times article points out:

Republicans have unsuccessfully tried to chip away at the authority and structure of the agency by proposing a commission instead of a single director to oversee it, among other ideas. They signaled Thursday that they want to reduce the agency’s powers by challenging the salaries of some staff members, the justification for its budget decisions, its authority to look into certain types of financial institutions and practices, and a number of other organizational issues.

Which sounds like there isn’t even any promise that the CFPB is going to be able to do anything.  It’s counter-intuitive to say that a so-called protection bureau should be limited in its “authority to look into certain types of financial institutions and practices” because that is supposed to be the whole POINT of this stupid agency in the first place.  But when something has “Consumer” in its name instead of “Citizen” that already says to me that the agency is sort of BS (We should be protecting the citizens and residents of America.  Calling us consumers is demeaning and makes me envision mindless drones at the mall sipping Orange Julius and buying cell phone accessories from overpriced kiosks).  Which is not to say that Elizabeth Warren isn’t doing some great work, but one person cannot stand in the way of an industry that has been very effective at making billions in fees and interests, whether it is from a mortgage or a credit card or other type of loan.  Now all of a sudden this brand-new agency is going to try to stand in the way of those healthy, growing revenues?  I’m interested to see where this whole thing leads (Prediction: Nowhere).

Nothing Over 99 Cents, Except for the ATM Fee

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The 99 Cents Only stores are all over Southern California and they really mean it when they say “Nothing Over 99 Cents!”  Except for one thing…

There's ALWAYS a Fee in This Town!

 

Just another reminder that EVERYONE makes their money in fees, financing and interest rates.  Although I will say that $1.75 is pretty low as far as ATM fees go.