If you have been wondering why you’re always borrowing even with a decent income, you’re asking the right question. Being curious about your finances and how to make it better is the beginning of a better lifestyle. Financial literacy is something most of us don’t really understand. We may have the head knowledge and know what good finances should be like, but it’s not always like that in reality. Since we are all different, what will work for Abel may not work for Annabel, so when you ask serious questions about your finances, you will get answers. In this blog, we will talk about different possible reasons why you may be a habitual borrower.

What Habitual Borrowing Does to You and Your Finances 

Everything has an effect, either positive or negative. When it comes to your finances, every decision you make affects your overall financial health. Where it gets dicey is when you’re a habitual borrower who relies heavily on credit cards, payday loans, personal loans or loans from close persons. Money borrowed today is a deduction from your next income, which means you have less to take care of your needs and obligations. Which then means you will resort to borrowing again.

For example, if Abel earns $2,000 monthly, and he needs the same amount to take care of all his needs and bills. If Abel’s car develop some faults and he uses his credit card to fix his car. If everything with the interest is $310 which he has to pay in full by the end of the month. Unless Abel reduces his expenses by $310, he will always be short of $310 every month. It doesn’t stop there, further emergencies can come up and it will all keep piling up. Before you know it, your debt is high and touching the sky.

Emergencies are not the only reason why people borrow. But we used this as an example so you could understand the ripple effect of borrowing on your finances. Let’s take a look at other reasons why you’re a habitual borrower.

Living beyond your means 

Many of us dream of a luxurious lifestyle, but our bank accounts tell a different story. It’s not as if most people close their eyes and buy very expensive stuff. But the little purchases here and there that your income can’t accommodate could be interpreted as you living beyond your means. It’s important that you don’t get carried away with spending because only you will bear the consequences. Most times, we overspend on what we don’t necessarily need and end up borrowing to take care of what we actually need. This is why you should avoid overspending and live within your means.

Lack of financial planning 

Some of us may not be given to overspending, but we may not realise we are going above what our finances can take. For example, food is an important part of your basic needs. But what if you are eating out a lot and the expenses are affecting you? If you plan accordingly, you may realise that cooking once in a while may help you save a few dollars.

Another perspective is that, when you don’t plan your finances, you won’t know where to cut back. When you don’t plan, then you may end up having less to take care of yourself, or little to no savings. Such that, by the time an emergency shows up, you will need to use a credit card to sort these bills or take out payday loans. The cycle continues like this and you keep borrowing again and again.

Buying on a whim 

At some point, every one of us has probably seen something and bought it without thinking twice. You’re passing by a clothing store, and you see this leather jacket that takes your breath away, you imagine how nice it will look on you when you combine it with denim pants. Without thinking about your student loan debt, probably a consumer proposal program you’re going through, or your mounting credit card debt. You went ahead to buy this nice $2,000 jacket. Afterwards, you start to regret it because you discovered you didn’t think through before swiping your card.

If this becomes a habitual thing, it will put a strain on your finances and you won’t be able to do without borrowing.

Lack of an emergency fund 

If you don’t have an emergency fund to help you in times of need, you may see yourself borrowing money incessantly. It’s important you develop an emergency fund so you won’t be stranded and always borrow.

Conclusion 

If you have high and overwhelming debts that are giving you worries, an end can come to them. It doesn’t matter what led to these debts, what’s more important is your debt can be reduced by up to 80%, and interest will stop immediately. You can speak with one of our debt experts at EmpireOne Credit to know how we can assist you in getting rid of your debt. Call us at (416) 900-2324 to schedule a free consultation with us. Being debt-free feels good!