Five Bad Money Habits… and How to Fix Them
I’m a Dave Ramsey UK based follower, I’ve learned from the big guy since I started paying off debt. Pre-debt payoff, I had a lot of bad money habits. Once I changed my behaviour, managing my money became a lot easier.
As a Dave Ramsey UK enthusiast, I get a lot of value from his guidance on debt. However, sometimes its hard to adapt the US-based guidance for Dave Ramsey UK followers, because we do things differently here in the UK. So that’s why I’ve compiled a list of my old money habits and how they keep you in debt. So if you’re into Dave Ramsey, but UK-based, you might relate to a few of these.
Here’s my five bad money habits that keep you in debt.
Bad Money Habit #1: Ignoring your debt
Ignore your debt and the problem just gets worse. I ignored our debt and buried my head in the sand. By rationalising that our car finance wasn’t ‘real’ debt, , I didn’t deal with it. Rationalising in this way means that you don’t see debt for what it truly is; money you owe that you are going to have to pay back. Ignoring debt will almost certainly lead to more debt, because you can’t fix your problem when you don’t acknowledge them.
Fix this habit by: Sitting down with all of your statements and tally them (you might want to bring wine to this party!). Make a budget and figure out how much you can repay. Yes, it’s painful, but once you do this, things can only get better from here. Dave Ramsey UK followers can follow Dave’s advice on this: you need a budget.
Bad Money Habit #2: Only paying the minimum in repayments
What if you make only the minimum monthly payment on a £5,000 credit card balance at 19.9% APR? It will take you 31 years and 11 months to pay it off. Also, it’ll cost £7,426 in interest (you can scare yourself with your own calculations here!). The simple fact is that only paying the minimums is like trying to fix the hole in the Titanic with sellotape; big problem, inadequate solution. It’s understandable that not everyone can snowball their debts with huge overpayments, but an extra few pounds every month can really make a difference.
Fix this habit by: Swapping your direct debit for the minimum payment on your card for a standing order, with as much as you can afford, to transfer to your account on payday. If you can’t afford to cut down to make overpayments, try increasing your income. Follow Dave Ramsey’s UK friendly advice and overpay your debts.
Bad Money Habit #3: Consolidating debt, or continuously using 0% balance transfer deals
Debt consolidation (i.e. taking out a loan to clear your credit cards) and balance transfer deals are paraded as though they are a solution to debt. However, you end up taking on more debt when you initially take them out! You’re getting rid of the urgency to repay what you owe when you consolidate. And this could lead you back into debt.
While 0% balance transfer deals can save on interest over time, they entice us into a cycle of debt, rather than actually paying it off. With both consolidating or transferring debts, while it’s always sensible to get the best deal, don’t do it if it’s going to make you complacent about debt repayment.
Fix this habit by: consolidate/transfer if it’s cheaper over the course of repaying your debts, but ensure you still make those overpayments and remain gazelle intense about getting rid of your debt. Dave Ramsey UK followers should take note that Dave advises that you don’t consolidate.
Bad Money Habit #4: Basing affordability on the monthly repayment, not the cost overall
This is one for those who have fallen prey to a car lease! When we bought our car, we went to the dealership and drove away the same day in a brand new shiny vehicle. We rationalised that a new car was cheaper because all we had to do was pay a monthly payment. Four years of repayments and £11,000 later, I learned my lesson.
It’s really common to think this way. We are sold on the idea of ‘buy now, pay later’ or ‘spreading the cost’ to persuade us to buy something we know we can’t afford. Remember that future you is being squeezed to pay for it later.
Fix this habit by: Calculating the overall cost of the product, and use this figure as a comparable when you are shopping around. Dave Ramsey UK followers should be aware that Dave never encourages buying a new car unless you can pay for it outright. Buy the car you can afford now is his advice.
Bad Money Habit #5: Looking for things to buy
This one was a revelation to me when I started paying off debt. I spent a lot of time looking for the next thing to buy– all out of boredom. My actions were passively saying ‘I want to spend’, whether I actually wanted the thing or not. What I was doing was walking around, asking to be told what I needed to buy. Considering I had £16k debt at the time, it was dangerous.
In reality, we already have a lot of stuff. The chances are, right now, you already have everything you could possibly need. The only time you need to go shopping is to replace something you already have that’s broken or worn out. Stop seeing all the things you need and start telling yourself you have enough, and life becomes surprisingly rich.
Fix this habit by: swap shopping and scrolling for another activity, preferably something you really enjoy (here’s my self-care on a budget to start with). Be mindful of what you do in your spare time, and avoid places and people whose message is that happiness can be bought! As a Dave Ramsey UK follower, I listen to his podcast on Spotify which keeps me super motivated when I want to spend.
These are my bad money habits and how to fix them. Leave me a comment below and let me know what your worst money habit is and how you curb it 🙂