Perhaps you have already been asking yourself, “Why is the cycle of my borrowing never ending?” Instead of repayment being covered and getting thinner by the month, you get bills that steadily get higher. But before wondering, ask yourself, “Am I giving myself unplanned expenses? How often do you use your credit card to buy something unnecessary to satisfy an impulsive desire?”
If you answered these questions truthfully and realised the problem, it’s time to face it: you might be locked in the cycle of impulsive borrowing. It would do you good to change this lifestyle and break free from this cycle. However, this requires change. You have to become more mindful, disciplined, and proactive in regaining control of your finances.
Why is there impulse borrowing?
One thing you should be aware of is that impulsive borrowing frequently traps you in your need to satisfy your wants rather than your needs. Think about it: you work hard for your money and spend it on something related to what you’ve accomplished to feel extremely fulfilled, then that feeling passes, and now you feel like you have no control over your habit.
It sounds like an accurate definition of impulsive spending, right? It is. Impulsive spending leads to impulse borrowing. The habit of making unexpected and unnecessary purchases with borrowed funds, which are often driven by temporary desires rather than financial considerations.
Recognising the signs of impulse borrowing is a great thing, as it is the first step towards breaking the cycle of impulsive borrowing.
How can we break the cycle of impulsive borrowing?
Always remember to build and prepare your budget and set your financial goals
When you opt to change your lifestyle, the first step is to assess your finances and re-create a budget and spending plan to manage them with greater effectiveness. When you are interested in controlling your finances, you will keep records of your monthly income and spending, then categorise the latter as fixed (rent, phone bills, groceries, etc.) and variable (entertainment, travel budget), as well as your savings.
We strongly advise you to use a budgeting device, or if you are diligent enough, map it into your budgeting note if necessary. There, you may quickly cut back on spending that you believe is unnecessary and direct it towards savings.
Once you’ve created a budgeting strategy, improve it by creating financial objectives as your road map to achieving long-term financial goals. Maybe you want a car, or maybe you want to be financially pressured while retired. Whatever it may be, budgeting and avoiding impulse borrowing can help you make it come true. These financial goals motivate you even more to remain committed to your budgeting plan.
Having well-thought-out budgeting and financial resolution goals will help you stay on track and resist the temptation to spend money on unnecessary purchases.
Your reality is not only in the present and future; it might be in the ‘magical’ moment
You must be aware that you live not only in the present and an idealised future, but also in a possible future where things go wrong. There may be times when your insurance company does not cover your type of illness, there could be a global economic crisis that can cause you to be laid off, or your house might need urgent repairs.
It is advisable to invest every dollar you make in another financial safety net known as an emergency fund. In the context of finances, the minimal safety net of having an emergency fund is enough to cover three to six months of living expenses. Even if you can’t spend a lot of your money on things that will only pleasure you for a short time, it’s better to have peace of mind in case of a future financial crisis.
Practice avoiding instant gratification
It is common to feel bored when staying on track. But if we let ourselves indulge in these pricey distractions and then eventually regret them, would we still choose things that simply provide temporary gratification? That means we must be trained to resist the urge to make immediate purchases.
So, how can you do it? Try setting a 24-hour waiting period before deciding on a transaction. These 24 hours will force you to reconsider: is that object truly useful and valuable, and can you afford it without borrowing? Well, if you give it a shot and succeed, you will be satisfied that you passed it, and you will become accustomed to it.
Seek your financial support and practice from them
Not everyone can simply recognise that they are locked in a cycle of impulsive borrowing. Many of them may argue that borrowing from a trustworthy institution is a normal part of everyone’s life. However, if you discover this now, we believe you will not feel regret, and it will lessen your burden.
We hope these are some helpful ways to end the cycle of impulsive borrowing that you are already experiencing or can avoid. Legalised money lenders in Singapore can also provide you with this thorough information and recommendations, as they have experts who can explain how to acquire responsible borrowing habits and solutions.
