The 5 "Debtly Sins"

In the church of finance, personal responsibility is the high priest. It’s true that outside forces will affect your situation to a point, but only you can dictate how your financial life will proceed. With that in mind, let’s take a look at five “debtly sins” that can misdirect your financial well-being.

1. Envy. It’s a natural human tendency to envy others that may be in positions we wish we occupied. We see families on TV who are portrayed as middle class but have all the trappings of the “rich.” Maybe the neighbors just bought a new car, or a relative purchased a new home. We get caught up with the “keeping up with the Joneses” mentality. It’s a problem that gets us in over our heads. You may feel rich for a while, but living beyond your means will catch up to you sooner or later.
    
2. Overconfidence. Americans as a whole are optimistic. Optimism is good, but overconfidence can make a situation go south. For example, you may be overconfident that you can pay off debt or deal with anything thrown your way. But while taking risks can have its pay-offs, you have to keep in mind the reality of your situation. Emergencies do come up. Are you prepared to pay for unexpected vehicle repairs or medical expenses? Being confident is one thing, but being unprepared can be disastrous.
    
3. Financially slothful. Your finances take work. You have to pay attention to due dates, loan terms, etc. It’s very telling that 34% of Americans don’t even know what type of mortgage loans they had (fixed or adjustable rate). You need to take the time to get the big picture concerning your finances. Stay on top of all your financials.
    
4. Greed. Let’s say you’re buying a big-ticket item for $10,000. There are some add-ons that look inviting. They add up to another $3,000. Now usually, that amount would look rather large, but because you’re already borrowing $10,000, suddenly that amount doesn’t seem like such a big deal. The amount hasn’t changed, just your perception. Resist the urge, the impulse!
    
5. Blame. We’ve already mentioned personal responsibility. Be sure you don’t fall into the trap of blaming others for your financial situation. Many lenders won’t stop lending to you just because you’ve already borrowed as much as you can afford. You’ve got to understand your situation and make that call yourself. The recent housing troubles are a prime example. Just because a lender is willing to lend you money, it’s not a green light for you to take the entire amount they’re offering, if you should even take it at all. You’ve got to take stock in your situation. As always, your best bet is to set up a coherent budget so you always know what you have available to spend.

If you find you’ve committed any one of these “debtly sins” (and who hasn’t…), you can still commit to turning things around by taking control of your financial situation and making a plan to get yourself back on track. But if you find yourself not knowing where to begin, give us a call and we’ll help you evaluate your situation and set a plan. You can also take advantage of financial counseling through Accel, a free service offered to Vantage members.