Nothing wrecks your finances more than a few bad habits. Think about it, you impulse spend at the grocery store(20 bucks lets say), you impulse spend at the clothing store(30 bucks), and you impulse spend on some electronics,(50 bucks) then you impulse buy your self some fast food lunch(5 bucks). That is $105 dollars you didn’t NEED to spend.

My personal financial bad habit is Impulse buying. Off the top of my head, i can think of a few. I bough a video game last week ($49.99) i buy food when i don’t need to, i bought a WaterPik (dental hygiene machine, $40), and maybe more i can’t remember. I could have easily saved myself $100+ just by avoiding the impulse to buy these things. I do not NEED them, but i wanted them, so i bought them.

Did you know that if you pick a product up, you will develop an attachment to it within 30 seconds? Wow i need to stop picking things up that i do not intend to buy. There is more info about The Science of Impulse Buying Here.

But Here are some other Bad Personal Finance Habits.

1. Making Minimum payments to bills
2. Making Late Payments
3. Using a credit card even though you have cash (Fastest way to get into debt!)
4. Using/Owning a stores retail card (please slit your wrist with the card if you own one, they are killing you with interest anyways.)
5. Not Checking credit report/score.
6. Not Saving
7. Impulse Spending
8. Living on more than you make

These are just a few and you can find more here.

So what can you do? Start Forming Good habits.

“Scientists agree that the average person needs at least 3 weeks to form a good habit.” – From WikiHow

If you have any of these bad habits listed above, they can be fixed. Here are some ways. Schedule Payments to credit card bills that are more than the minimum, that takes care of paying the minimum, AND the late payment bad habit.

If you use credit cards way more than you use cash, leave it at home for a month, see if you even miss using it.

If you own a Retail store card, Pay it off and never sign up for them again. You will be saving yourself a lot of money, many store cards charge close to 30% interest!

Check your credit score Monthly using www.creditkarma.com! It is free and does not count as a Hard credit inquiry.

Automate Your savings plan! If you do not have an Online savings account right now, click on the ING Direct link on the Right hand side of this page and sign up NOW! You get great interest rates, NO FEES, NO MINIMUMS, NO HASSLE. SO many benefits and NO downsides. That is a bank worth using!

Once you have the savings account open, set up automatic savings deposits!

And last but not least, STOP IMPULSE SPENDING! Yes i know it is not easy, i struggle with this, but i recently came across a website called Habit Forge, and it is a web app that helps form new good habits.

All you do is sign up, enter the habit you want to start and each day it will email you asking if you were successful with the habit. You reply yes or no, and it compiles data. It goes on for 21 days. (3 weeks to form a good habit).

So for my case, each day i get emailed asking if i was successful in Avoiding Impulse Spending. So far it has been going good! i have missed a few days, but i am being honest, and at the end i will know if i am cured of the bad habit or not!

Check it out, sign up free! at www.habitforge.com

I am now about 6 months into my debt payoff, and i would like to do a little report.
I have been recently listening to some Dave Ramsey podcasts and he has a segment where people call in to his show and talk about how they are debt free ect ect. Its great, people pay off 40k in 15 months, they scream and yell and its awesome, leaving me feeling a little depressed. I don’t have that much in debt sure, but i am not paying my debt off nearly as fast as that.
I know i can not make excuses. I lose focus some times. I buy things i do not need, i don’t pay as much as i COULD towards my debts, but i have come a long way since OCT 09.
As of this week i have paid off $2890.62 since October. This includes just about all of my debts, from my current Credit Card, to my old card i paid off, my car loan, and my loan from my parents. It doesn’t seem like much, but i feel better.
This month i have really dedicated myself to paying off more debt, by not spending my money on things i do not need.
NO entertainment, no movies, no eating out, no gadgets, no video games (That is a hard one, MAG comes out soon..) All in all i am going to start doing what DR says and live like I’m poor. I’m thinking about getting a second job as well.
I am striving to be a better example to those in debt. But at the same time truthful of my faults, and my declines.

Yeah you heard me, bite the bullet, face the music, take responsibility for your irresponsibility.

I have a friend how came to me for help the other week, his situation, debt that had gone to collections. He knows i am knowledgeable of this topic and came to me for help, one of the first times this has ever happened within my group of friends.

I was excited first off to help, and to make his life better. “Alex” had a credit card that had went into collections, a phone bill that had went to collections, a store credit card in collections, and a small amount of money left from his last car loan that went to collections.. That is a lot of missing payments.

I told him the first thing we needed to do is check his credit score. So we did and it is not terrible, 500-550 range. I have seen worse. Using Creditkarma.com allows you to do a few things that almost replicate a credit report and it said that he had 2 missed payments. This didn’t sound right, but we just assumed some debts were not reported to agencies yet.

“Alex” also was not sure of how much he owed to most of these debts. He had a vague idea, but after late fees, interest charges and what not we were not even close to his estimate.

The next step is to negotiate some of these debts to lower amounts. Debt collectors are usually down to settle for a lower amount than you owed to the original creditor. They do this because they buy your debt for maybe half of what you owed, then they try to get more than they paid out of you. It is Win Win, they make money, and you save money. This doesn’t mean be irresponsible and miss payments, the key is to not get into consumer debt and miss payments.

We started to call each Collections agency one by one. The first we called was actually the collections agency portion of the bank he owed money to. They were not going to negotiate or cut a deal. A majority of the debt is to this bank. The bank was using its own people to collect this debt, and they want the full amount.

Next we called was a collections agency and the results were very surprising. He originally owed his cell phone company $536 and to get a lower settlement, all my friend had to say was, “I really want to pay off my debt, what can you do to help me out?” Right there the guy offered a settlement of $375 (that is almost $200 saved!) if he had the money by his next pay check. Debt collectors will make deals because they are still earning money. You can negotiate with them, haggle, and make offers.

Debt Collection Script: What to say!

You: Yes i have a debt that has gone to your collections company and i would really like to pay it off.

DebtCollector: What is your name? I will check to see how much you owe.

You: Yes my name is Pete and my debt is from so and so bank.

DebtCollector: Ah yes Pete i see you right here and it looks like you owe $3400. Can you start making payments this month?

(This is where you have the option of settling or negotiating. Settling usually only works when you can pay if off right away.)

You: I really want to pay this debt off as soon as possible, what can you do to help me? Can we settle at $2000? I can pay $2000 next week.

DebtCollector: I am afraid i can not settle for $2000, but what i can do is settle for $2400 if you make the total balance payment within 2 weeks.

You: That is possible, and i will do that. Thank you.

OR

You: $3400 is not working for me, i really want to pay off this debt but do not have a large sum of money.

(It is at this point where they might suggest you borrow the money from someone else.. They just want their money and they do not care if you have to borrow it from someone else! Hilarious)

Debtcollector: What i can do, is if you set up automatic payments with your checking account and promise to pay 200 dollars a month, i will cut down your total to $2800.

You: Sounds great, here is my checking account number along with bank info, you are approved to withdraw 200 on the 25th of each month.

All in all by making this 15 minute phone call you can save yourself hundreds if not thousands of dollars in payments or a settlement.

The rest of the day we spent planning his budget on how he was going to pay off the other debts. Such thoughts such as taking out a big loan and paying off all the other loans was thought of (consolidation) but not implemented.

With just a few phone calls my friend was able to save himself hundreds of dollars worth of payments, and is now back on track to paying off his debt. If you owe money to banks, stores, or even individuals and you are not paying it back, beware of collections, threats and even the possibility of a law suit. Know your rights as a consumer, stop harassment by knowing these Debt Collection Laws.

Yeah tell that to every celebrity who is in massive debt, went bankrupt, or died only to leave their financial irresponsibility to someone else.

You might think this yourself, but this is only because people tend to forget the root cause of debt, spending habits.

Your spending habits affect debt, not income directly. There are a few instances when debt is created by unforeseen accidents, events or challenges. But the root cause is reckless spending with a credit card.

As mentioned in How i got into Debt i spent money recklessly on unnecessary events or products. I spent on eating out, hobbies, experiences i could not afford, and none of which was really worth it.

Having a few million in your bank account wouldn’t change much of your debt. You probably would say if you had a million you would pay off your debt! Tell that to all the people who win the lottery and go bankrupt. When you give someone who is used to living on 50k a year and give them a huge sum of money, they tend to become very irresponsible. Winning the lottery is the first of many huge complications, first off everyone you know will ask for money, being the nice person you are you will lend them some. They won’t pay you back. Say goodbye to 1/4 of your money. Then you will buy an expensive car, say a Lamborghini, with the mindset of paying it off with your lotto money that is coming in slowly. Then you buy a Mansion. Then people are trying to kill you, sue you, steal your money, you start doing coke, and your money is gone. Your bankrupt and in millions of debt. Don’t gamble, its stupid.

I am going to use MC Hammer as a prime example of this topic. Nothing against him.

“The problem occurs when exorbitant spending goes from isolated incidents to a must-have lifestyle. Apparently, when MC Hammer sang “Can’t Touch This,” he was not singing about his money. The famed rapper’s forty-member entourage outspent his $33 million income on lavish day-to-day living.”- How Celebs Go Bankrupt

So please don’t tell me you would be out of debt if you were rich. We are in debt because we have bad spending habits, if we had a few million it would burn a hole through our pockets.