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Living with credit

5 bad behaviors that can bust your budget

Kristie Aronow

When I was a child, my parents never held back. If I wanted it, I got it. My father is a cardiologist and made enough to fund everything. As a result, I never learned about saving or, at a more basic level, patience. When my father left the family after his divorce from my mom, he took his money with him. Suddenly, the rest of us were left to survive on a fraction of what we were accustomed to having.

To keep us in our not-so-extravagant-but-still-beyond-our-means lifestyle, my mom turned to credit cards. I learned quickly the difference between a want and a need, but if I really wanted something my mom would make it happen.

When I got accepted to my dream college, I didn’t hesitate to take out every student loan available to me. I didn’t take time to understand the interest rates or what type of payments I’d be making after graduation. This left me banking on the government program that would forgive the remainder of my debt 25 years from now.

But living in constant debt is a great burden. I quickly realized I’d owe a mountain of interest and still be paying off my loans by the time any of my future offspring entered college. Now, after an exhaustive review of payment plans, I have selected one that will, I hope, save me money and be paid off before my 40th birthday.

Over time, I’ve learned from my financial snafus. I’ve discovered that with great credit comes great responsibility. Your credit history can influence where you live, your job prospects and even your love life. I’ve also learned the hard way what going into a great deal of debt looks and feels like. This blog is dedicated to those who need a guide to beginning their finances and finding your way to credit glory.

The financial attitudes you were raised with can have serious ill-effects on your credit. When you are ready to begin to build your credit, don’t fall prey to these start-up sins.

Impatience: The biggest challenge facing today’s instant-access generation is lack of delayed gratification — the idea of waiting and saving up to purchase items. A study conducted in 2011 by economists at Boston’s Federal Reserve Center for Behavioral Economics and Decision Making showed that better credit scores belonged to those willing to wait for long-term benefits rather than accept immediate rewards.

Do this instead: Before you buy, take a deep breath. Remember that unless you pay off the cost of the item immediately, interest will accrue, possibly nullifying any sale benefits. Decide if the item is one that you can afford to show patience in getting before making the purchase. This is especially true of anything that involves a midnight release (books, movies or video games), which might cost less a few months after the release.

Check out: Miranda, a contributor to Shoebox Coupon, breaks down several areas where showing patience can save you money.

Laziness: Paying full-price for anything when sales are happening nearly every day can cost you big time. Take time to research, review and time your purchase. In the era of the Internet, comparison shopping should be second nature.

Do this instead: Don’t be passive buyer, control your financial destiny and actively seek out sales. Comparison shop, coupon cut and time your purchases accordingly.

Lust: Convincing yourself that something is a want versus a need is fairly easy to do. When you are approved for a credit card, remember that your income didn’t get a boost. You can’t buy Prada when you’re working at Paco’s Tacos.

Do this instead: If you absolutely must have a designer piece, save and budget for it accordingly. Don’t use your card to finance a lifestyle that is beyond your means.

Check out: G. E. Miller discusses how to decipher a want from a need in his 20 Something Finance blog.

Envy: When your family or friends buy a shiny, new car, you might find yourself comparing your own automobile — it can go from seeming like a sensible purchase to rust bucket in the blink of an eye. When you’re just starting out, do not allow yourself to buy beyond your means. If you do, you could find your payments outlasting the product value as well as struggling to make ends meet every month.

Do this instead: Induce your own envy by finding products for less. Knock-off items or similar sale items can be just as valuable for a fraction of the cost.

Moodiness: Don’t confuse your credit card with a therapist. The high you get from retail therapy is fleeting and leaves both your emotions and your wallet feeling empty.

Do this instead: Rather than spiking endorphins by spending consider trying exercise, which releases similar hormones. Or, if you really need to reward yourself, set a $10-$25 budget for yourself.

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