How to get out of debt: Breaking bad financial habits

Being in debt can be a heavy burden to bear. Not only does it affect your wallet, but it can also have consequences for your emotional and physical health and more. But there is a light at the end of the tunnel: The biggest secret to getting and staying out of debt is changing your mindset about money.

Here we explore the psychology of bad financial habits and offer tips for breaking them, to help you learn how to get out of debt.

Bad habit: Shopping as emotional therapy. That new pair of shoes or tech gadget may boost your mood temporarily, but it also digs you deeper into debt and can become addictive over time.

How to break it: When the retail therapy urge strikes, take a beat and think about what’s behind the purchase. Do you really need it or are you using it to feel better? Having a counter argument at the ready can also help. For example, if you frequently tell yourself, “I deserve this treat after the week I’ve had,” counter it with an alternative mantra, such as “I deserve to be debt-free.”

Bad habit: Trying to keep up with the Joneses. The desire to keep pace financially with your social circle – whether it’s family members, friends, neighbors, or co-workers – isn’t new. However, the advent of online social networks has certainly intensified this trend, as we scroll through our friends’ “online lives” and marvel at their new SUVs and tropical vacations.

How to break it: The key is to focus on your own financial goals and remember that a new car you can’t afford won’t help you get there – or make you happier – in the long run. If it helps, remind yourself that things aren’t always as they seem on your neighbor’s side of the fence.

Bad habit: Burying your head in the sand. Whether it’s making just the minimum payments on your already-at-their-limit credit cards or not opening statements and bills, ignoring debt isn’t a good strategy for making it go away.

How to break it: Yes, being in debt can be depressing and even scary, but facing what you owe is the first step in getting a handle on your finances. (Download our free Debt Overview Worksheet for help.) Then you can create a realistic budget and work with creditors on payment plans.

Bad habit: Not enhancing your financial know-how. Sure, you know that spending less and putting more toward your debts is the logical way to get ahead of them, but if you’re intimidated about learning more than just the financial basics, you could be limiting your ability to not only get out of debt but to growth your wealth.

How to break it: Spend a few minutes each week learning about some aspect of personal finance, or attend a class or seminar if there’s one that interests you –perhaps one focused on how to get out of debt. Boosting your knowledge could be a boost for your self-confidence and your bottom line.

What financial habits – good or bad – do you have? Share them in the comments below!

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