Dealing with debt is one of the biggest financial hurdles many people face. Wanting to get rid of debt quickly is a positive mindset, but it’s crucial to avoid some costly mistakes that can hold you back or even lead to more financial problems. Here, we’ll go over five common errors to avoid.
1. NOT HAVING A CLEAR PLAN AND TIMELINE
Starting your debt repayment journey with a solid plan is key. This plan will keep you focused and motivated, and it helps you track your progress. Take a good look at your current situation—how much debt you have, your monthly income, and your needs and wants. Are you thinking about debt consolidation or refinancing? How long will it realistically take to pay off all your debts? Answering these questions can help you develop an effective strategy, whether you choose to aggressively pay down debt or take a slower, steady approach.
2. PICKING THE WRONG DEBT TO PAY OFF FIRST
Having a plan is great, but it’s just as important to make sure you’re paying off the right debts first. Whether you use the snowball method, the avalanche method, or a mix of both, do it strategically to get the best results. For example, if you want to save on interest, you might want to pay off high-interest debts like credit cards before tackling student loans.
3. IGNORING THE BENEFITS OF EARLY PAYMENTS
Paying off debt should be a top priority. If it’s something you only think about at the end of the month, that’s a mistake. Making payments as soon as you get your income, even if the minimum payment isn’t due yet, is a wise move. Budget for extra debt payments and set up automatic payments to stay on track.
4. CONTINUING TO ACCRUE NEW DEBTS
If you’re paying off debt but still taking out new loans or using credit cards irresponsibly, you won’t make much progress. When you’re focused on repaying debt, it’s best to limit your credit card usage and avoid taking on new loans. If you must use credit cards for essentials, make sure you pay off the entire balance each month to avoid adding to your debt.
5. NOT HAVING A STRONG MOTIVATION
Paying off debt can take a long time and require a lot of dedication and sacrifices, so it’s easy to lose motivation. Knowing why you want to get rid of debt and believing in that reason can help you stay strong during tough times. Think about why paying off your debt matters to you, how it will affect your life and finances, and who else will benefit from it. Surround yourself with supportive people who share similar goals to keep your spirits high.
Have you ever made any of these mistakes while trying to pay off debt? How did you manage to recover?