The Slavery Cycle
There is one rule to gain financial independence. If you want to be wealthy, it is the key to your wealth. If you want to be financially independent, it is the means by which you keep your independence. Those who break this rule end up in a cycle of slavery which is incredibly difficult to break. The one rule you need to know and follow is to spend less than you earn. It is a simple concept, yet the most often broken rule in the entire financial world. There are many common reasons people overspend. If you find yourself in one of these categories, don't give up hope. You can still gain financial independence and build wealth by overcoming bad habits. Let's take a look at the common reasons people overspend.
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Effortless Credit
Once upon a time, credit actually took some work to get, but in this day and age, credit is a by-word. Gaining access to credit cards is practically as easy as tying your shoes. Your mailbox probably has at least one if not two or three credit offers sitting in it right now. Mortgages, car loans, pay day loans, credit cards, and refinancing offers permeate our existence. Effortless access to credit is the number one reason people overspend.
The reason people overspend when using credit is that it is easy to charge it and they don't have to look at the purchase price. Credit card companies have made it easy to buy what you can't afford and pay it back in small increments. The catch is that if you only pay the minimum payment every month, a $5,000 purchase can take you up to ten years to pay back, especially with a normal interest rate on your borrowed funds. It feels like free money. The only free money comes from the government, your parents, or someone you inherit from. Credit does not fall into any of those categories.
If you have a problem with overspending due to credit, it is time to get some serious help. Spending on credit is not an easy habit to break and will take some severe budgeting to overcome and get you back on track to financial independence.
Effortless Cash
Do you remember when you actually had to go to the bank during business hours to cash your paycheck? Or when you needed cash, you had to go to the bank to get it? Those days are gone with the wind. With the advent of direct deposit, ATM's and 24-hour online banking, access to cash has become completely effortless. As a result, people are more likely to spend their cash.
The problem is that most people no longer balance their checkbook because they don't have to have the cash on hand to make purchases. Spending money used to take some pre-planning. Now, impulse buying is king, and marketers are taking advantage of that. Don't fall into the trap of impulse buying. You will always fall into the overspending cycle if you allow yourself to shop without a plan.
To get your spending under control, you need to start carrying cash. Pre-plan purchases and don't walk away from a store with something you hadn't planned on buying. Go to the store without your debit or credit card. Walk in with cash in hand. You don't have to plan what you are going to buy specifically if you don't like doing that as long as you go with a specific amount of cash you are able spend and no plastic to back you up. You'll find that you spend a lot less this way.
