The other day I had a moment of clarity; I was speaking to someone as interested about personal finance as myself, and realized I keep repeating a bad pattern. Until that moment, I hadn’t been able to see the pattern or even acknowledge that I had a repeating financial pattern. But I had an “Ah ha” moment that is making me think differently about my spending and is motivating me to change some ways in which I do things.
But just what is that pattern, you might wonder? Maxing out credit cards and then paying them off – over a span of a year or two. Now, the paying them off part is great, but the maxing them out is not. My cycle also isn’t annual or bi-annual, it’s more like every 5 to 8 years, which is perhaps why I hadn’t realized I even had a pattern until now.
My conversation with this individual first started with thinking back to the decade of my 20’s when I royally messed up my credit. I repaired it in my early 30’s, then maxed out new credit cards and paid them off in my mid-30’s for a debt-free experience of about 3 years. (See, the “cycle” is in a span of about 5 – 8 years). Now that I’m in my early 40’s, I’ve again gotten myself into some credit card debt and am slowly paying them off with the “pay off” date of next June – or 17 months away. This is round 3 of my “cycle” within a span of 15 years.
So how am I going to change and step out of this repeating cycle? Knowing myself fairly well, I won’t be switching to cold, hard cash. That just seems to disappear without a trace of exactly where it was spent. I also don’t like using my debit card since I prefer not having funds withdrawn from my bank account on a daily basis – it’s just too much for me to track on a fluctuating income. Instead, I’m researching prepaid convenience cards, like the Chase Liquid card or the Wells Fargo prepaid debit/credit card. This seems to be a good option for everyday expenses like groceries and household items.
Loading the card with a set amount each month (based on my Quickbooks data) should help me minimize my spending and give me some breathing room to pay off the credit cards. I’ve used this strategy with my Starbucks transactions, loading my gold card with a set amount, and it has really changed my spending habits at Starbucks and reduced the total amount that I spend in any given month. Having been successful with the gold card leads me to believe that I’ll have a similar amount of success with a prepaid credit card. The only drawback to this method is it will take a couple of months to fully make the switch to the prepaid card since I’d like to load it once a month with a substantial amount.
I should see a remarkable difference in my spending habits and debt payoff by April or May of this year. Now that I can “see” the cycle, I can do something about it.
Have you come across cycles or patterns recently that you didn’t know existed? What did you do to change them?
10 Comments
Make sure to look for a prepaid card with the lowest fees possible (none would be awesome, lol). Everybody has a bad habit cycle (mine is weight gain/loss), so it’s good that you’ve figured yours out and will be working on it. 🙂
@Crystal – Good point about low fees, I compared some cards on nerdwallet and see that they definitely vary.
I wouldn’t say I’ve had long-term patterns that negatively affected my finances, but sometimes I’ll get paid and be so giddy that I spend my money super fast. Binge spending. I’ve learned to curb it.
-Christian L. @ Smart Military Money
@Christian L – I’m hoping that my realization leads me to break my cycle. Baby steps, first though. 😉
It sometimes takes a really long time to see exactly what we are doing. My motto is; “better late than never.” Congrats on one step forward.
We all have a bad habit or two, in some aspect of our lives. That said, recogniton of patterns is a great initial step. I think it’s great that you’re seeing this, and are trying to get out of this cycle.
@Squirrelers – I’m working on changing my pattern now that I see it. Hopefully I’ll be able to notice a huge difference in my progress by mid-year.
I’ve been feeling a bit uncomfortable with my spending habits relating to clothes for a while. I’ve always been a bit of a clothes horse but since I generally don’t buy expensive clothes, and because I have a fairly high income (and no debt), I didn’t think it was a big deal. And I also gained, and then lost, about 30 pounds over the course of about 5 years, so I was in a situation where I first needed larger clothes and then wanted to reward myself with smaller clothes when I lost the weight. But more recently I’ve been uncomfortable with my spending. I used the opportunity of getting my annual credit card statements to review my spending pattern for the last year and had a “I spent HOW MUCH?!!!” moment. That helped me realize that the reason I’m uncomfortable is because I sense that my expenditures are too impulsive, too often. Combine that realization with a concern about the amount of $ I’d need to fund this spending habit in retirement and I realized that I needed to do something, both from a retirement planning perspective and a psychological/behavioral perspective.
There are a few other areas in my husband’s and my spending habits that are worth reconsidering as we continue on the downward slope to retirement (in about 15-18 years). As I mentioned, it’s not like we’re going into debt. In fact we saved over 100K last year (including employer contributions to retirement plans). But I think that some of our current spending patterns aren’t sustainable in a retirement scenario – or at least they would require some sacrifices in other areas that we value. In other words, do I want my purse-buying habit to get in the way of our joint plans for exotic holidays?
So I’ve decided to take a long-term, one (or two) habit at a time approach to this, which is the kind of NY resolution that has worked well for me in the past. (Last year’s successful new habit was to dispose of something (e.g., donation) for every new thing acquired, so that we were net zero accumulators for the year.) This year, I’m going to go hard core on my clothes spending habit with a plan to cut my expenditures by 80% for this year. (I’ll revisit the budgeted amount next year – it might go up, it might go down depending on needs.) I’m also going to cut my book/magazine buying habit by at least 33%.) I’m also going to try to have at least one (preferably two) “zero purchase” months for each of those habits, where I buy nothing in that category for a full month.
Next year, I (or we) will pick another spending habit to focus on and see if there is room to cut back. One of the things I’d like my husband to work on is to dispose of more stuff so that we can get by with less space. (He’s pretty frugal in many ways but he never gets rid of ANYTHING. And so he wants lots of space for his stuff. For example, my “office” is a piece of wall with a small desk. He has our 12’x13′ second bedroom crammed with two desks, three computers, filing cabinets, bookshelves, etc.)
@Frogoutofwater -Sounds like you have a plan to minimize your spending this year. I’ve analyzed our spending patterns and there’s not much to cut from. In our case, I think it’s a lack of stable income and high cost of living. This year my goal is to increase our income by a good chunk or we’re going to have to reevaluate why we live in an expensive area!
Yikes, the problem is with our ready access to money that is not ours. Our country has made credit a way of life. I am older and I can tell you my parents did not have credit cards. I only have one credit card and I use it to my advantage to accumulate points for travel rewards. If it were not for that I would not even have one. These cards are just too tempting to run up debt regardless of any strategy you may employ. I know I am old school here, but I am old.