The habit of living on credit: how not to fall into a trap?

“Do not renounce the bag and the prison,” says folk wisdom. But for some reason it seems that with whom with whom, but with us, this will definitely not happen. After all, we have thought and calculated everything, and there is little that can interfere with our plans.

But now the collectors are ringing the doorbell again, and there is absolutely nothing left of health and nerves … When did this happen? How?

“Family couples who come to me for a consultation with holes in the family budget do not give the impression of irresponsible people,” says personal finance expert Anastasia Veselko. – Rather, on the contrary. These are serious people who are not accustomed to making thoughtless spending.

The vast majority of financial problems are caused when something has gone wrong, such as when a family’s income is reduced due to a job loss, or when the family business is not doing as well as expected.”

Everything goes according to plan?

Let’s say you have income that allowed you to take out a mortgage. You start a renovation, but to do it, you also have to take out a loan. The pledged budget has exhausted itself – and now you are already applying for a credit card and you yourself do not notice how you find yourself at a financial day: when each family member has a loan, or even two.

“It is inexplicable, but true: in such situations, it is usually not avid casino players who find themselves, but adequate family people with a profession,” says Anastasia Veselko. “In such families, the budget is discussed, there is an understanding, albeit at a minimal level, of plans and goals, the level of income and expenses.”

Often the cause of many troubles is our confidence in the future. It seems that we have calculated everything: take a mortgage, make repairs, send my wife on maternity leave … But then something goes wrong as we planned, and we have to contact the bank.

“Everything comes at once – one, the other, the third, like a vicious circle from which you can’t get out,” says the personal finance expert. – Being in a state of constant stress, we decide not to pay anything at all and start missing payments – simply because it is difficult for the psyche to withstand such stress. And it comes down to collectors.”

The answer to the age-old Russian question “What to do?” sounds simple – have a reserve fund, be aware that something can go wrong, and remember that if you decide to take another loan, then the total amount of loan payments should not exceed 30% of your income.

“Indeed, not everyone likes to plan, and even more so – to think about a rainy day, so as not to croak,” agrees Anastasia Veselko. “But there is another way. For example, to think not about black, but about a bright day and how nice it will be to approach it with a supply of money.

Suddenly, your friends will offer you to buy a cool car from them at a low price? Or will you be able to move somewhere? For circumstances that bring joy, savings are also needed.

According to the blogger, after the pandemic, many of us have come to terms with the idea that not everything in life can be controlled and that everything in it can be turned upside down for reasons that are beyond our control.

“It’s great to live here and now, when there’s enough for everything – for paying salaries to employees, and for mortgages, and for trips, and for a kindergarten for a child, but it’s never superfluous to make sure,” advises Anastasia Veselko. “It’s not just planning – it’s responsibility and taking care of yourself and your future.”

off the hook

Is it possible to get out of the vicious circle of loans and debts? How to do it? Anastasia Veselko suggests the following steps:

• Admit to yourself that you have loans. Making the effort to write off all your debts is a truly traumatic experience. It’s easier to hide, hide “in the house”, bury sand in your head – as if the loans will disappear from this. People want to pay their debts smarter and faster, they are waiting for a magic recipe. But it doesn’t exist.
• Examine your loans. What are they? If a mortgage can be justified by buying your own home, then it is better to get rid of credit cards as soon as possible. This is a red light, a kind of indicator that the situation is close to critical: especially if you got a second credit card, and the interest-free period for the first one has ended.
• Write down the balance of the debt, monthly payments and accrued interest in a column. Draw the table by month and cross off the repaid amounts each month. It may seem like complete nonsense – especially from a financial point of view, but it really helps. There is a feeling of control over the situation: that you are not hiding from loans, but see them, methodically crossing out the cells.
• Create a strategy. If you have multiple loans, choose which one you will pay off first. Someone starts with payments on the largest loan, it is easier for someone to close the smallest ones first.

The main financial advice is to refinance loans. For example, debt on three credit cards can be closed with one consumer loan: the rate on it will be lower (you will save on interest), and the schedule will be the same. The main thing is to stick to the chosen course, and with the systematic repayment of debts, you will begin to get out.

Until better times

Only the lazy one does not talk about investments now, but, according to Anastasia Veselko, acquaintance with investment processes should take place only when you feel financially stable.

“For people who are financially vulnerable, investing is a trap,” she says. – To win back, we respond to “tempting” offers and think that by investing free money, we will earn a fabulous amount and pay off all our debts at once.

This is a fatal mistake. Under no circumstances should this be done. Yes, there is a deceptively pleasant feeling that you are able to compensate for past mistakes and failures and be king in one fell swoop, but it is worth remembering that investments are a risk. You can also lose money on them and end up in an even deeper financial hole.”

According to Anastasia Veselko, it is better to invest when you have an airbag, and if the mortgage payment (ideally, in rubles) has become comfortable for your budget.