Getting into debt is obviously a lot easier than getting out of it. The latter takes a lot more conscious effort and hard work. It’s not just about paying the monthly due, but also about changing your spending habits, learning how to cut back on expenses, establishing a budget and following it and so on.
If you are having trouble resolving your debt, it might be because you are committing these mistakes:
Mistake # 1 – Not prioritizing debts
If you have more than one debt, it’s important to formulate a payment plan that will help you efficiently resolve all your debts. To do this, you must first arrange your debts according to priority. Most experts will tell you to put on top priority those that have the highest interest rates. Pay them off first while making minimum payments on other debts. This way, you can save more money in the long run.
Another recommended approach is to prioritize debts that have the lowest amounts. Why? Because they are the easiest ones to tackle. And once you have completed them, this gives you the confidence and motivation you need to work on the other bigger debts.
Mistake # 2 – Not saving for emergency
Some people make the mistake of thinking that they can forego saving for emergency just because they are attempting to resolve their debts. But this is never a wise move. You need to keep saving and building your emergency fund no matter what.
If something bad happens and you are unable to work or your income source is cut off, and you have no savings whatsoever, this will put you into an even bigger debt than what you originally owed. And you surely do not want this to happen.
If you are having a hard time saving money and paying off your debts both at the same time, what you should do is to either generate more income or minimize your expenses.
Mistake # 3 – Not changing your spending habits
To resolve your debt sooner, you must make significant changes in how you spend your money. You should make an effort to cut down on your expenses. This will help you save more money that you can use to pay off your debts. Here are some suggestions on how you can trim your expenses:
- Cook and eat more often at home
- Look for free and cheap hobbies
- Don’t go grocery shopping without a plan and a list
- Brew your own coffee at home
- Avoid impulse shopping and temptations
- Think many times before buying something
Mistake # 4 – Not understanding your options
You actually have many options when it comes to resolving your debts. You can consider debt consolidation, debt settlement, debt relief program and so on. Now the problem is going into these options without understanding what it entails. You must research extensively about the option that you’re considering before getting into it.
Mistake # 5 – Battling all the debts at the same time
Tackling several debts at the same time can be too overwhelming. Most of the time, this tactic doesn’t do the borrower any good. It is usually better to resolve a debt one at a time. It’s best to resolve each debt according to priority, which brings you to tip # 1.
Mistake # 6 – Not using a budget
A budget will help you stay financially fit. It can also be your best ally for getting rid of your debts. To formulate an effective budget that will work for you, you need to track all your expenses, and allocate your income to the important expenses that you have to make each month. Be sure to include debt payments in the budget so you can be sure that you get to take care of them accordingly.
Mistake # 7 – Not asking for help
You don’t have to do this on your own. People who care about you such as your family and friends can provide you with the help that you need, whether financial or moral support. Then there’s also a professional credit counselor or a financial adviser whom you can ask for practical advice and tips.
If you want to finally get out of debt, and start your journey to healthier finances, start by avoiding these mistakes.