Stop These Bad Habits Before Debts Become Unmanageable

More often than not, personal finances get into bad shape because of bad habits. It is necessary to recognize these habits as bad habits, and try to be rid of them otherwise these bad habits will make the person to take more debts that eventually become unmanageable.

The first one in this list of bad habits would be keeping several credit cards. A study conducted by APAC showed that at the beginning of 2008, there were about 73 million charge and credit cards in the United Kingdom. In contrast, the country has population of only 60 million! 

Each credit card allows the holder to buy goods and services subject to a maximum limit. This maximum is fixed without considering the limits under other cards. This means the credit card holder has access to more funds that he or she can really repay. Of course, the main reason for taking these cards is the introductory offer. But yielding to this small temptation may land the person into huge debt problems. One way to bring down credit card debts is to pay up the highest APR cards.

Because of so many credit cards, store cards, and catalogue dues, it is also easy to forget a few at the time of monthly payments. Any delay in such payment not only affects the credit profile, but also entails some late fees. By keeping fewer credit cards, it is easier to manage all the cards, and escape any punitive action. If there are some lapses, it is likely that credit may be denied when it is needed the most!

Spending money recklessly would be another easy way to get into unmanageable debts. People who earn less than what they spend will invariably find themselves in financial mess. This habit should be curtailed at the very beginning, as it is very difficult to kick it off at later stages. In fact, this is the fastest way to reach unmanageable debt levels! How does one identify this habit? It is easy. If the person uses credit cards to pay bills about a week before receiving the pay check, then obviously, the money earned is not being stretched enough.

Some people’s way of managing money is appalling. There is no co ordination between receipts and payments. In process, cash comes from different sources and is spent without keeping track. Debts too meet the same fate. Such debts may include credit card debts. This habit of not spending in a systematic or planned way may mean some debts being kept on hold, and in process, accumulation of debts. Credit report of the individual reflects all debts and lapses. In so far as debts are concerned, ensuring that credit report is good would mean this habit is curtailed.

Another bad habit is denying any debt problems. Many people whose debts need to be handled with care tend to take it light. If help is taken at the right time, the problem may not reach unmanageable levels. The right time to wake up from sleep is when it is difficult to pay the amounts on credit card, or mortgage, or store card.

If unmanageable debts are identified in time, then subject to certain conditions, these debts could be cleared within 5 years, under Individual Voluntary Arrangement.