Struggling With Debt? 5 Poor Money Habits May Be To Blame
The average American consumer has over $100,000 in debt. While this does include all types of consumer debt, including mortgages, student and auto loans, credit cards, store credit cards and personal loans, that's still a significant amount of money for one person to owe.
It might make sense to incur some kind of debt, such as if you're buying a house and have a good plan to pay off your future loan. Of course, it's all too easy to keep accumulating debt -- sometimes to the point where it seriously hurts your financial goals and long-term security.
Read More: Suze Orman Has 10 Tricks for You To Pay Off Thousands in Debt
Explore Next: 9 Unusual Ways To Make Extra Money (That Actually Work)
We spoke with two financial advisors, Colby Van Sickler and Derek Jacques, about top money mistakes people in debt make and how to avoid them.
1. Let Emotions Get in the Way
Emotional spending is a very real problem, one that's sometimes exacerbated by the stress caused by having a lot of debt.
"I once had a staff member whose coping mechanism was shopping," said Colby Van Sickler, advisor and CEO of F3 Wealth Management. There was always something on sale that had to be purchased, and it was typically on their high-interest credit cards. Every month, they would say they were going to change, but every Monday they would have something new."
For those who tend to make their purchases based on their current emotions or immediate wants, one option is to simply cut up or leave behind those credit cards.
"A credit card disassociates money from a purchase," Sickler continued. "You swipe that card and take home whatever you want at that time. But at the end of the month, the cost of all of those 'things that you wanted' come due. Get your emotional purchases in check, before they lead to buyer's remorse later."
2. Keep Spending
More often than not, overspending is what leads to debt. And those who already owe money and continue to spend are likely to end up with more problems down the line.
"This is not uncommon, but it is obviously only going to add to their debt burden," said Derek Jacques, a bankruptcy attorney and the owner of The Mitten Law Firm. "One thing I always suggest is to create a 'needs' budget, and stick to that. If it isn't a necessity like housing or food, then don't spend money on it."
3. Don't Prioritize Paying Off Debts
Once someone gets into debt, it's harder to get out of it -- especially without a proper plan.
"Small debts such as credit cards with high interest rates can lead to unintended consequences. Consequences such as having to cancel health insurance," Sickler said. "One auto accident or cancer diagnosis can lead to bigger debt that is difficult to overcome. While health insurance is expensive, it is not nearly as expensive as an out-of-pocket cancer treatment."
Learning to prioritize and pay off those debts is one way to avoid this kind of financial mistake.
"Not all debt is the same," Jacques said. "There are debts, like on credit cards, that will continue to accrue interest and get worse with time. While you may have other loans and debts to pay, the ones that are either well past due or are growing with interest need to be paid first in order to dig yourself out of the hole."
4. Ignore the Problem
It may be easier at the moment to ignore the problem, but it won't help if those debts keep growing.
"It is very easy to simply ignore your debts, not pick up the phone when creditors call, and throw out any mail notices you receive," Jacques said. "The best thing to do is actually communicate with your creditors. Often they have programs that can help you with getting caught up if they see you are genuinely making an effort to pay your debts."
5. Neglect Emergency Savings
Paying off existing debt is important, but it's also vital that you have some cash reserves for those "just in case" situations that come up.
"When you're struggling financially, an unexpected expense can be devastating. Whether it be a medical problem or your car needs to be repaired, if you don't have any cash reserves, you'll have to go deeper into debt to pay these expenses," Jacques said. "Put aside money from your paycheck in a savings account to cover these unexpected expenses."
Even a small amount -- like $500 or $1,000 -- can help with minor emergencies and keep you from going deeper into debt.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
More From MoneyLion: