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When Bad Spending Habits Cost You $232K

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When Bad Spending Habits Cost You $232K

I spend my entire work week online, reading and writing about personal finance. Lately, I have been browsing through tons of sites, discussion boards, and forums designed for people dealing with debt and bad spending habits. However, a post from a woman in Alaska highlighted a problem we all face. In her original post, the woman detailed her family’s current debt, seeking advice and support. Before I delved into the comments, I found myself wondering how this could happen. Furthermore, how many other people found themselves in similar circumstances?

Identifying the Bad Spending Habits That Got You Here

Car and Vehicle Loans

At first glance, I was blown away by how much money they owed for car and vehicle loans. When totaling the remaining balances on their truck, van, camper, and Prius, it amounted to approximately $98,000. That is just about half their debt! However, I knew there had to be more to the story. So, I combed through the comments to understand why a couple so deep in debt would take on the burden of so many vehicles.

Buying Second-Hand to Avoid Costly Car Payments

While most of the vehicles were necessities, there were some great points from other commenters about the newest one. The family bought the Prius for their side job delivering DoorDash. While it is commendable to find ways to bring in more money, buying a new car for it seems counterproductive. It would be much more economical to purchase a used car instead of taking on an additional monthly car payment.

I feel like many of us fall victim to this consumer mentality. We feel the need to have the latest or newest things, myself included. Although I have always wanted a new car, I had to be realistic and buy vehicles that fit my budget. Anytime I was tempted to look at new vehicles, my dad also reminded me they lost value as soon as you drove them off the lot.

Furthermore, if you can’t meet the monthly payments, the dealership turns your loan over to a debt collection agency. In the worst case scenario, you could have the vehicle repossessed, leaving you stranded and still in debt. Even if you do a voluntary repossession, you may still find yourself paying for a vehicle you don’t even own.

Credit Card Debt

The next piece of the puzzle that stood out was the overwhelming balances on their credit cards. Having dealt with five-figure credit card debt, I understand how easily credit card balances can slip beyond your control. The convenience of shopping online makes it even harder to break bad spending habits. It becomes difficult to resist temptation, especially when you feel like there is no way out. If I was already that deep in debt, what was a little more going to hurt? However, my loved ones reminded me that there is always hope. That’s when I contacted debt relief program for a free consultation to help me get back on track.

Tackling Credit Card Debt

The first step in tackling credit card debt is to determine where you’re spending your money. Once I identified my bad spending habits (travel and transportation), I cut up those credit cards and transitioned to a bare-bones budget. It was an uncomfortable adjustment, to say the least. I sacrificed many creature comforts and indulgences for the cause. But, I knew that if I wanted to climb out of my financial hole, I had to stop digging. In the end, I was able to clear my credit card debt in less than two years. Thanks to strict self-discipline and a limited budget, I was finally debt-free.

The Debt Avalanche Method

Now, we can’t be certain what constitutes this family’s credit card debt. However, the outstanding balances with Best Buy and Apple suggest that electronics are the main culprits. While technology is expensive, the worst part about store credit cards is that that also come with much higher interest rates. Their Best Buy card has a whopping rate of 27.24%!

If you are strapped with several high-interest debts like these, the debt avalanche method probably makes the most sense for you. In contrast to the debt snowball, the debt avalanche method targets your debts with the highest interest rates first. After making all your minimum payments, any leftover funds should go to balances on these cards. Paying off these debts first will save you more in interest and lower your monthly payments over time.

How Bad Spending Habits Affect Those Around You

Including Your Partner

Reading through the comment section, one pattern was very clear. The OP openly shared her struggles to get her husband on the same page. She explained how difficult it was to get him to stop using the credit cards and spending money they don’t have. Speaking from personal experience, this resistance creates tension in both your finances and personal relationship. If you and your partner are not working towards the same goal, then you are already fighting a losing battle. If you want to make any progress in paying down your debt, then you need to make sure your priorities align.

Setting an Example for the Next Generation

One of my greatest concerns is about the example I am setting for the next generation. Although I am no financial expert, I know that children watch and learn from their parents’ spending habits. How we handle money forms their attitudes, behaviors, and beliefs about their own finances. If we are unable to identify and correct our own bad spending habits, it increases the chances that our children will also face the same challenges. That was enough motivation for me to break the cycle.

Even if you have good intentions, you have to make a budget and start implementing it. It is a long arduous journey, but you have to begin somewhere. Even when faced with six figures of debt, there is hope. You can start budgeting as a family, and include children in some of the discussions. While they don’t need to know all the details, we can all use support to stay on track to reach our financial goals.

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Being Frugal vs Cheap: What’s the Difference?

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What is the Difference Between Frugal vs Cheap?

Growing up in a household where money was always a concern, I knew the value of a dollar. My dad showed us how to be diligent with our money and make sure to get the best deal on things. Our entire family was involved, so we each played our part not to waste anything. From his example I learned the importance of both budgeting and saving. Don’t get me wrong, his lessons have helped me avoid some sticky situations. However, I remember several moments in my childhood when his thriftiness crossed the line of being frugal vs being cheap. I still cringe at some of the memories of watching him sort through discarded items on the curbside or calculating savings, down to the fraction of a cent. So it begs the question: Where is the line between frugal and cheap?

The Definition of Frugal vs Cheap

Although we often use these words interchangeable, the social connotations completely change the meaning of the words. We often use these adjectives to describe someone’s spending habits. Unfortunately, one has a much more negative connotation and stigma attached to it.

For example, the Cambridge dictionary defines frugal as being careful when using money or food.

On the other hand, cheap is used to describe someone who is unwilling to spend money.

In the first meaning, the focus is on spending money wisely. The second emphasizes the person’s inability to spend money, even when necessary. While anyone can comprehend the difference between the two, you can truly understand the difference when someone else’s cheapness negatively impacts you.

The Major Differences Between Being Frugal vs Being Cheap

1. Cheap means the price is always the bottom line.

A cheap person thinks that everything, no matter the actual value of the item, is overpriced. These types will complain about the cost of everything, even slight fluctuations and differences that amount to a few bucks in savings. If you are cheap, then it is fair to say that you would likely go to extremes to save a dime. However, you should also consider how much time you are investing to get the best deal. Cheap people often cannot weigh the value of their time against saving money.

This past summer, I helped my dad with some paint-matching on a vehicle we were repairing. I watched him agonize over his options and drive across the city to compare prices. The worst part of it all was that in the end, he used the original paint he already had in the garage. Although I love spending time with my dad, he could have saved himself days of decision-making if he had just bought the exact item he wanted online. Not to mention, the gas money would have covered a large portion of the supply cost. When looking for the line between frugal vs cheap, ask yourself, “Is it worth my time?”

2. Being frugal means valuing savings, but valuing people more.

A frugal person can certainly appreciate a good deal. When living on a limited budget, eating at restaurants is a luxury. However, we would find ways to indulge now and again. My parents would use gift cards and coupons to get additional entrees or extra sides that the whole family could enjoy. I didn’t even mind sharing dishes if we went out to more expensive eateries.

However, certain family members displayed an entirely new level of cheapness when going to buffets. They would hide sandwich bags in their purse or pockets to take home in order to get another free meal. I was so mortified when this happened, I would run out of the restaurant, ahead of everyone else. I did not want to be seen or associated with them because it was so obvious what they were doing. If your cheapness causes anyone to feel embarrassed or ashamed, it is time to re-evaluate your priorities.

Additionally, here are apps frugal people use to save instead of doing embarrassing things.

AppsFees and MinimumBest For
Digit30-day free trial period. $5 per month Setting aside automatically
Acorns$1 per monthSpare change investing.
Qapital$3 membershipLetting you set rules to automate savings.

3. Cheap people are willing to go without basic necessities to save money.

There are certain things in life that every human needs in order to survive. There is no way to avoid these expenses, so you must budget for food, clothing, shelter, and health care. A frugal person will find ways to save money on these expenses. However, a cheap person may choose to go entirely without them. If you have kids, this means they are also forced to do without basic necessities. Even worse, they may be afraid to ask for them.

As a child, my mom had severe allergies and would often go without medical treatment. To save money, my grandparents would use specific foods and herbal remedies to combat the symptoms. While some helped with mild ailments, sometimes her symptoms compounded and grew into larger, more expensive problems. Due to my grandfather’s cheapness, my mom had to suffer unnecessarily because he didn’t want to pay for the initial doctor’s visit.

Thankfully, I never wanted for these things as a child. But, I have noticed personal tendencies towards cheapness. In my case, it was stretching my supplies to their absolute limit. For example, I would water down my shampoo and conditioner to get every last drop. However, after the third or fourth dilution, I’m not sure there was any product left in the mixture. I realized I was being cheap, not frugal, by allowing myself to go without things I truly needed.

Valuing Quality Over Price

One last thing to consider when comparing deals comes down to quality. While it is tempting to go with the cheaper options, there are some items you simply can’t skimp on. In fact, investing in quality products will actually save you more money in the long term. Furthermore, this attitude will also save you time you would have to spend repairing or buying replacements down the line.

When it comes down to it, “cheap” is not a positive attribute. Therefore, it is important to know where to draw the line for yourself between being frugal vs cheap. If your cost-cutting ways are negatively affecting those around you, that is not okay. Furthermore, it can take away time from loved ones. How you spend your time reflect what you value most.

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