Getting out of debt can be harder than most people think. With consumer debt constantly increasing and almost 200 million Americans owning credit cards, many people struggle to pay off their debts. And it can be quite easy to fall into one or more of these mistakes when trying to get out of debt.
Mistake 1: Not changing your spending habits
It can be hard to change your entire lifestyle or just give up a few habits in order to pay off your debts faster. But the truth is it’s very unlikely you’ll pay off your debts soon while keeping the same spending habits and having the same income.
You don’t need to radically transform your lifestyle, rather make a few adjustments that will allow you to make more than just the minimum monthly payment on your debts.
Examine your spending habits and see where you can cut down on some superfluous expenses. For instance, check all your subscriptions and see whether there are any that you barely use and consider canceling them. Or think of how often you buy new clothes and ask yourself whether you buy them because you truly need them. Do you really need that extra bag or that coat? If not, use that money towards repaying your debts.
If you’re unsure whether an expense is necessary or just a whim, try putting off the purchase for a few days or weeks and then ask yourself whether you really need it. No more impulse purchases!
Mistake 2: Not creating a plan
As Alan Lakein said, “Failing to plan is planning to fail”. One of the biggest mistakes people make when trying to get out of debt is not having a plan.
Just paying off the minimum each month or occasionally paying something extra won’t cut it. Have a seat, write down all of your debts with their interest rates, and make a plan of how you want to pay them off. There are different debt-reduction strategies you can try, but make sure to pick one and stick to it.
Also, make sure to write it down. As with all goals and plans, they work better when you write them down and check them out regularly.
Mistake 3: Trying to pay off all your debts at once
You need to be realistic. If you have more than one debt, you can’t expect to pay them all off at once.
To go back to the previous point, you need a plan. And whether you choose to first pay off your smallest debt or the one with the highest interest rate, the important thing is to deal with them one at a time.
This means you will make the minimum monthly payment on all your other debts except the one you choose to pay off first. This way, as soon as you’re done with that one, you can put that monthly payment towards the next one and so on.
Are you making any of these mistakes? Or did you notice any other mistakes that people make when trying to get out of debt?