Last updated on September 30th, 2022 at 05:29 pm
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When it comes to debt repayment, there are a lot of things that you can do to set yourself up for success. However, there are also plenty of ways to mess things up.
Luckily, Your Debt Expert is here to help break down the most common mistakes when paying off debt. These are the things you’ll want to definitely watch out for!
And, not only does Your Debt Expert specialize in helping struggling individuals get their finances back on track, but their site is also a great resource for free tips and advice on everything from mortgages and taxes to answering questions, like, “what powers does a bailiff company have to recover debts?” So, let’s get to it.
Don’t Make These Mistakes When Paying Off Debt
Not Prioritizing Debts
One of the most common mistakes people make when paying off debt is not prioritizing their debt repayments. This can lead to missed payments, late fees, and even damage to your credit score. By prioritizing your debt repayments, you can ensure that you’re making the most progress toward becoming debt-free.
You can choose to prioritize your debts by paying more towards those with the highest interest rates, the highest balance, or even pay off those with the lowest balance first (in order to eliminate that debt completely).
No one method is better than another. What’s important is that you’re making progress toward paying off what you owe.
Not Creating a Budget
When talking about mistakes when paying off debt, not having a budget must be included. Living without a budget is the fastest way to overspend and accumulate more debt.
A budget will help you track your expenses and ensure that you’re living within your means. Without a budget, it’s far too easy to fall deeper into the debt trap. If you’re serious about becoming debt-free, it’s time to start crunching those numbers.
Not Tracking Expenses
Another mistake, related to budgeting, is not tracking your expenses. This can lead to spending too much on impulse buys and even coming up short when it’s time to pay for your necessities.
By tracking your expenses, you can ensure that you are living within your means. If you want to eliminate your debt and stay on course going forward, start tracking your expenses now. You can use something as simple as a notebook, or try an app.
Not Living Within Your Means
One of the biggest money mistakes people make is not living within their means. This is a sure way to accumulate more debt and can eventually lead to financial ruin.
Stay within the budget you’ve created to be certain you’re spending less than you earn and only using credit when absolutely necessary. By living within your means, you can start to pay off your current debt and stop accumulating new debt.
Not Creating an Emergency Fund
Not creating an emergency fund can be another costly mistake. When unexpected expenses occur (and they always do in one form or another), you can take care of them without adding to your credit card debt or neglecting other bills.
If your goal is to become debt-free, you should have an emergency fund to cover things like car repairs, home repairs, medical bills, or a loss of income.
Not Paying Yourself First
A common mistake many of us make is not paying ourselves first. When you “pay” yourself first by setting aside money each month or out of every paycheck, you’re ensuring that you have a financial cushion when needed to cover expenses and debt repayments.
This will help you avoid harming credit score or having to pay late fees. As you work towards debt freedom, remember to pay yourself first as part of your financial strategy.
Not Seeking Help
Not seeking help also makes our list of mistakes when paying off debt. Don’t let your debt burden become so great that you feel overwhelmed and hopeless.
There are many resources available to help you get out of debt. Debt counseling, debt management programs, and debt consolidation loans are just a few of the options available to help you on the path to becoming debt-free. If you’re feeling overwhelmed by debt, be sure to seek help from a reputable organization.
If you’re considering, debt consolidation, use a personal loan calculator to compare reputable lenders, and find the option that best meets your needs. This can save yourself both time and money as you work to become debt-free.
Not Making Extra Payments
Another mistake people make is not making extra payments on their debt when they’re able. Neglecting to do this can lead to paying more interest and taking longer to become debt-free.
When you make even small extra payments on your debt, you are paying down the principal balance faster. That means you’ll pay less in interest charges and get out of debt quicker.
Not Staying Motivated
Another mistake that can be hard to avoid is not staying motivated or just giving up on paying off your debt. When you’re feeling overwhelmed or discouraged, it’s important to stay motivated, although that can be easier said than done.
There are all kinds of resources available to help you see your progress and encourage you to stay on track. Debt calculators, debt repayment plans, and debt snowball plans are just a few of the tools available to help keep you on course toward your financial goals. When you’re feeling discouraged, be sure to seek out these options.
Not Reviewing Your Progress
The last mistake on our list of mistakes when paying off debt is not reviewing your progress. This ties into staying motivated. It is important to review your progress regularly so that you can see how far you’ve come.
Track your progess with any of the tools mentioned above or in a simple notebook or spreadsheet. When you see that, with determination, you can create a better financial future, you’ll be encouraged to keep at it.
By avoiding these 10 mistakes when paying off debt, you’ll be well on your way to becoming debt-free. Remember, the journey to debt freedom is not always easy, but by following these tips, you can make it to the other side.