How To Go Broke In The Blink Of An Eye
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Originally Posted On: https://nowayknowhow.com/
Succumbing to lifestyle inflation is a surefire way to impale your financial freedom dreams and go broke in the blink of an eye.
It can be frustrating to watch your bank account dwindle over time without knowing exactly why.
The truth is, many people simply do not pay close enough attention to their spending habits and often fall victim to lifestyle inflation.
Buying impulsively and overusing credit cards are some of the biggest money mistakes to avoid at all costs if you want to steer clear of going broke.
Here are 7 ways to prevent financial regret and proactively protect yourself from going broke.
Resist Lifestyle Inflation
One of the biggest challenges to a budget is lifestyle inflation, or the tendency to spend more money as you earn more.
Even if you score a pay a raise or promotion, resist the urge to make major lifestyle changes that increase your expenses.
Instead, focus on building a solid financial foundation by socking away money in savings accounts or paying off debt.
Avoid Easy Credit or Payday Loans
The rise of buy now, pay later (BNPL) payment plans and availability of easy credit and payday loans can lead to a mountain of debt and overwhelming financial troubles that can put you on a fast track to going broke.
Keep in mind, companies that offer easy credit options often charge sky-high interest rates, making it challenging to pay back what you owe. Payday loans, on the other hand, have a formidable interest rate and should only be used in case of an emergency.
It’s always best to borrow within your means, review interest rates, and keep in mind the long-term financial implications of borrowing.
Try Cash Stuffing
Cash stuffing is the practice of putting all of your cash into one envelope or jar and making a conscious effort to only use the money in it for specific, necessary expenses.
The upside is that this practice makes you think twice about your purchases and helps you evaluate whether it is something you truly need.
Cash stuffing is also a great way to monitor your spending habits and allocate your money toward things that are exclusively essential.
With cash stuffing, you have a tangible representation of your money, and it is clear exactly how much you have left for the month.
Create A Budget
Keep it old school and go back to the basics. Believe it or not, it is possible to create a budget without penny-pinching.
Creating a budget is a tried-and-true way to manage your money, curb your spending, and help you find ways to save. Creating a practical budget can help you understand your financial habits and identify areas where you can afford to cut back.
When creating your budget, make sure to include all of your expenses, from monthly bills and rent to streaming subscriptions and dining out. Be honest with yourself about your spending habits, and strive to live within your means.
Prioritize Long-Term Goals
When setting financial goals, it is important to prioritize your long-term objectives over short-term pleasures. Think about what you hope to achieve in the future and what steps you need to take to get there.
Run financial ‘fire drills’ quarterly in order to assess and grade your overall financial health.
By focusing on long-term financial wellness, you’ll be less likely to overspend on frivolous purchases that won’t pay off in the long run.
Practice Mindful Spending
Mindful spending is all about being aware of your purchases and understanding your motivations behind them. It is important to take the time to think through each purchase and how it will affect your overall budget.
You can lessen your financial stress by living within your means and not buying impulsively.
Before making a purchase, consider the impact it will have on your finances and whether it is worth the potential blow to your bank account.
Finally, it is crucial to stay accountable when it comes to your budget and spending habits. Find a friend or family member to hold you accountable and check in on your progress regularly.
Alternatively, a financial planner might help keep you on track for your financial goals and provide strategic support. Take time to consider whether a financial planner is right for you.
Sidestepping lifestyle inflation and overspending is essential to maintaining financial health.
By creating a budget, resisting the urge to splurge, prioritizing your long-term goals, practicing mindful spending, and staying accountable, you’ll be well on your way to financial wellness.
Instead of going broke, you can avoid the pitfalls of lifestyle inflation and build a solid financial foundation that your future self will be proud of.
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