5 Brilliant Suggestions How to Spend Money with Bad Credit

You might already be familiar with the concept of spending money. But not all spending is the same. If you have bad credit, you may have less money to go around. So, learning how to spend money when you are in debt and have bad credit is a good skill to learn.

There is no magic solution for this dilemma, but with smart spending and a smart budget you can break the glass ceiling and get yourself out of debt. This will open up more doors for investing and growing wealth. But you need to take that first step. Here are 5 ways how to spend money more wisely (and in some cases NOT spend money) when you are in debt.

Prioritize your Debt & Concentrate on One at a Time

Spend your time and money on debts with lowest balances first.

When you have bad credit or a lot of debt, it can be overwhelming. Even with a solid smart budget that accounts for every penny of your money, the compounding interest rates that make some rich are actually making you poorer.

First, sit down and write down all your debts. You probably have already done this at some point if you built a smart budget, or a budget of any kind. But the difference here is to record the details of the debt – balance, minimum payment, interest rate, and length of the term (if it is a loan).

Not all debt is created equally – items like a mortgage and a secured loan with a low interest rate can hang around a little longer than credit card debt or unsecured personal loans. These are usually the ones that come with the highest interest rates. So, these would be the first to pay off. Generally, find one with the lowest balance and a relatively high interest rate.

Once you prioritized the list and found your first candidate, you are going to work to pay this off. Concentrate the extra funds in your budget to paying off this debt first. Work within your budget and make extra payments or add on additional principle to each payment. Then, once that is paid off, move on to the next one on your list.

This consolidation strategy is often called the snowball effect or the debt snowball. Now, you can use the funds allocated for the previous payment to fully go towards the next debt on your list. And thus, the snowball of money you have gets bigger. Eventually you will be able to tackle all but your largest secured debt.

Don’t Compete with your Friends & Family

how NOT to spend your money - buying to keep up with your friends and family

Envy is your enemy when it comes to figuring out how to spend money if you have bad credit or are in a pinch. This is especially dangerous if you find you have a little bit of money accumulated after paying down some of your debt. Someone you know might get a new car, and envy kicks in. You want one too. You deserve one. But it would mean taking out another loan.

Don’t fall victim to this thought. Keeping up with the latest fashion trends, buying new things, new electronics, and overspending will get you further into debt. This is not a winning strategy for you in the short term and long term. It is best to save your money and give yourself some distance and time. Are you buying this because you want it? Or because you want to be just like your friends? Or maybe a step up on them? Don’t rush into any rash decisions. Take some time and think it over, especially if the purchase will mean taking on debt.

An alternative would be to make a unique affordable purchase that you are proud of. Perhaps it’s a new take on a popular idea that you can make your own. This will give you the same feeling of pride while at the same time giving you the opportunity to share it with your family and friends.

Always Go Shopping with a Plan

Grocery Shopping with a list

It doesn’t matter what you are shopping for – groceries, a car, clothing, electronics…anything. Always go in with a plan. Make a list either on paper or in an app like Google Keep or the notepad that comes on your iPhone. And stick to that list. This will help you avoid overspending especially when doing regular tasks like grocery shopping.

If you are shopping for a new car, do your research before you reach out. What cars have the features you really want? Prioritize the features so you can be prepared to make alternative choices. Often times, in a car dealership we feel rushed or pressured to make a decision quickly. This is obviously done on purpose to get you to close a sale. By preparing yourself ahead of time, and knowing your budget you can go into those situations with more confidence.

Many electronics aren’t necessities. Face it – you probably have things laying around the house that you bought and barely used. So, you have to ask yourself why you are buying the gadget or appliance. Is it because something broke and you feel the need to replace it? Or is it really needed? Asking yourself these questions BEFORE clicking the buy button or going to the store might save you from a needless purchase.

Invest in Yourself

investing yourself in a good book

Nobody can really tell you how to spend money, but if you are going to invest in anything why not invest in yourself? Take an online course and stick with it, pick up some books on Amazon or your local bookstore and learn something new. And remember, you don’t have to potentially profit or make money out of everything you do. (Some blogs and online advice try to get you to monetize all your talents and hobbies.)

Sometimes it’s good to just learn something new. Someday the opportunity to monetize it might come up. But the joy and satisfaction of learning something new does more for your self-confidence and emotional well-being than a failed business venture might. Don’t feel pressured.

Reward Yourself for Little Victories

Rewarding yourself with friends is how to spend money wisely

Spending money on yourself can feel luxurious and mean more if you don’t do it too often. Allowing yourself to spend money as a treat or a reward can be incredibly beneficial and motivating. Let’s say you pay off your first piece of debt using the snowball method above. Plan a treat for yourself, whether it is a nice dinner or a small day trip with your friends.

If you feel comfortable, you can even share with them the reason you are celebrating. This will make it more meaningful. The reward doesn’t have to be anything large either. It can be as small as an expensive coffee or beverage – provided you don’t indulge in the reward too often. Then it would feel just common and routine.

You work hard for your money and are working even harder to correct your credit and get out of debt. How to spend money on yourself when in this situation is a real game changer if you do it right.

Knowing How to Spend Money Wisely Doesn’t Have to be Hard.

Use common sense and give yourself time and space, especially in difficult or confusing situations. Everyone is tempted by purchases. Even the wealthy 1% are tempted to make a purchase they may regret later. If you give yourself time to think over the purchase or scenario and let your decision be based on actual budgets and numbers rather than your heart or emotions at the time, you will be able to spend money more wisely and save for a better future.

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