Worrying and stressing about your financial state is also not good for your mental health. So with that said, let’s delve into 5 common mistakes to do with paying off debt. We hope it helps you avoid them!
Unless you’ve changed jobs or have recently come into a lot of money, your salary doesn’t really budge. If you are working with a salary that is similar to the one you had when you got into debt, you won’t suddenly have the means to get rid of it.
It is also unlikely that you’ve changed your spending habits. So, you need to manage your expectations when it comes to getting a handle on your debts. You will either have to increase your income or cut back on spending to make higher repayments. Doing this is not fast or easy.
Make a long-term schedule that is easy to stick to. The visible progress will also put you at ease. This brings us to the next point.
Failing to plan
If you don’t have measurable goals written down, you will struggle to pay off your debt. You will also have no way to track your progress. Here are some things you need to do:
- Budget – You need to know exactly how much money you can put towards repayments. Plan effectively on how you will cut down on your expenses. Just like a diet, if you’re too drastic you won’t stick to it! Think of the minimum amount of cutting back you need to do. Once you’ve successfully done that for a month, you can consider tightening your budget even more.
- Add up what you owe – Tally up all of the money you owe, including fees and interest. This will factor into your budget (mentioned above). It will also help you come up with a rough timeline for paying it all off.
- Select which debt needs to be paid off first – Pay off debt with the highest interest first. Leave the debt with tax incentives and low interest to be paid second or third. Although; if you’re results-driven, you can opt to pay off the debt with the lowest balance as this can help you feel accomplished.
Not saving at the same time
It is still important to stay in the habit of saving while working off your debt. You may be tempted not to, or you might see your debt as first priority. However, if you don’t have substantial savings or emergency funds available, you may find yourself in even more debt down the road.
If you do encounter an emergency and you end up taking out even more credit to pay it off, you’ll be back to square one.
Not asking for help
If you are truly struggling to pay off your debt, there are free services you can consult for help. There are several hotlines you can call to get free advice on how to manage things.
You can also reach out to relatives or friends for help, but we understand this isn’t an option for everyone.
There is also an option known as ‘debt consolidation. This is a way of lumping all of your debt together, with varying interests, etc., and making one payment towards all of them simultaneously. So, you may want to consider a debt consolidation loan.
Sometimes the interest on these loans can be less than the average interest of the other types of credit you have. Though it is still a form of debt, it can make repayments seem feasible and more of a hill than a mountain.
Not counting your successes
It’s so important to see how far you’ve come. Don’t beat yourself up about how far you need to go. It can make you feel hopeless. Making good on your credit repayments takes discipline, which takes time to develop. Use your current situation as motivation to do better.
Keep your chin up
It is easy to get disheartened in a tough situation, but there are viable solutions out of any amount of debt. If you allow yourself enough time to accomplish this goal, it can feel much more doable than if you try and rush things.
If you want to look into a debt consolidation loan, you can contact Credit24.com.au, a market-leading provider of personal loans and fast loan approvals.