12 Dangerous Habits That can Sink You Deeper Into Debt

American consumer debt is at an all-time high. According to the New York Fed Consumer Credit Panel, total household debt in the third quarter of 2022 reached $16.5 trillion.

Is there a way to crush your debt once and for all? Absolutely, but it requires avoiding bad money habits that can sink you deeper into debt.

Here are 12 of those dangerous habits and what to do instead.

Peer pressure is huge. You may not feel a direct order to keep up with other people in your social circle, but it can get sneaky. If one of your friends buys a new car, you might be tempted to buy one too.

Break this habit by realizing that you carry all of the consequences of your spending. In other words, it isn’t your friends that will have to clean up the debt. That job is yours and yours alone. Better to avoid it completely by living within your means.

For most people, if it’s in their primary checking account, it’s up for grabs. Spending all of your money is a guaranteed way to keep living paycheck to paycheck.

Instead of continuing the cycle, break it by adjusting your payroll distribution. You can send a fixed amount to your main checking account, and a percentage to savings. This will ensure that you are consistently building an emergency fund and avoiding more debt.

Payday loans are often sought after in urgent situations, but they’re a bad deal: They can have interest rates of over 600 percent!

Not having a budget strategy is a dangerous habit. You aren’t aware of how much you have coming in, how much you have coming out, or even how much you need to take care of life’s expected and unexpected expenses.

Once you have a budget, things that used to be “emergencies,” like car maintenance and property taxes, just become part of the budget.

Expenses tend to creep in, making it easy to end up with “more moth than money,” as the old saying goes.

It’s a dangerous money habit to have because if you don’t have any idea of your expenses, you can’t really plan for unexpected events. This puts you in a rough position where you may have to take out expensive loans or run up credit cards, pushing you deeper into debt.

Pro tip: Many of the best budgeting apps automatically analyze your expenses from a linked bank account to keep you on top of your spending.

Checking out the best restaurants in your city is fun, but it can add up very quickly. Even fast food runs start stacking up.

If you order every single week, that’s money that loses the ability to benefit you beyond a full belly for the evening.

A better approach is to work eating out into your budget, but pack lunches for work and cook most of your meals at home.

Paying the minimum on credit cards is a surefire way to keep yourself in debt longer. That’s because the minimum balance on credit cards goes to pay mostly interest and very little of the balance.

Pro tip: By paying more, more of your payment goes to the original balance rather than just interest. You can also rescue what you owe by switching to a low-interest credit card.

What you get approved for in terms of a home loan and what you can actually comfortably afford every month are often two different figures.

Typically speaking, your mortgage shouldn’t exceed 28% of your take-home pay from an affordability perspective.

In some markets, this might mean a lot less house than you expected. But having the cash flow to handle repairs, save for unexpected expenses, and still put away for retirement is much more important than having the biggest house on the block.

Sadly, the science of retail is designed to take as much of your money as possible. Indeed, shopping every single sale is a dangerous habit that can sink you deeper into debt because it encourages spending.

This means that not every deal is truly a deal. Even if it’s a 75% off sale or a clearance deal, costs can still add up. Stay home and don’t add items to your online shopping cart either.

Just like spending to keep up with other people, you can also spend too much on a car. It’s a purchase that's guaranteed to go down in value and one that takes maintenance and upkeep.

Pro tip: Buy a car that’s reliable and affordable when the total cost of ownership is calculated in. And try these hacks to save money on car insurance.

That check engine light won’t go away just because you put a little duct tape over it. Unfortunately, when money is tight, it’s hard to find space for car repairs. This is why having an emergency fund is so important.

While some small shops are now offering financing through third parties, the interest rates aren’t very good, making it even more difficult to get out of debt.

Pro tip: Set aside money for repairs throughout the year. Even if you don’t need many repairs, the fund can grow to enough to either repair your vehicle or get a new one without stress.

If you don’t look at your credit, you are leaving yourself vulnerable to fraud or even just incorrectly reported information.

Traditionally, the three major credit bureaus allowed for one free credit report each every year, but currently, consumers can look up their credit report weekly. This is a temporary benefit due to the ongoing COVID-19 pandemic.

This habit can drive you deeper into debt because your credit score directly impacts the interest rates you receive. The worse the score, the more you’ll pay for credit cards, loans, and even apartments.

The bar can be an expensive place, with the average tab for just four drinks going from $80 to $100.

Add in the parking fee or cab ride, along with any other bar stops you’ll make, and going out for a night on the town can leave you deeper in debt than you might expect.

Entertainment is one of the largest spending categories that can get out of control, but unlike rent or utilities, you can control it.

Good money habits open up big doors. If you’re trying to take on larger goals, like buying a home or taking better vacations, it all starts with building up good money habits and avoiding the dangerous stuff.

Of course, that’s not the only part of the puzzle to solve. Eventually, you will have to address your income, including raises, promotions, or even a side hustle.

Start with saving and investing money, and pretty soon you’ll find that you’ll have enough breathing room to boost your bank account as well.