It is so easy to get things on credit or with the help of loans. We discover something we want, and we buy it. Most people usually buy things with the good intention of paying them back as soon as possible. Nevertheless, even with the best intentions in the world, debts accumulate and become insurmountable little by little. If you have tried to get rid of your debts, but you are not able to make a dent in your debt, you could be in a free fall among some of these common pitfalls. It is very easy to end up with debt, but it is certainly much more difficult to get rid of it. If you manage to avoid these pitfalls, you’ll be well on your way to being debt free and enjoying financial freedom once and for all.
Immerse in the heart of the subject
If you are trying to repay the debt without any strategy, you will succeed, but a little at any price. This will probably take you a lot longer and you will encounter many more obstacles throughout the process. Determining an appropriate approach will keep you organized and on track to reach your goal of freeing you from your debt.
It is essential to establish a game plan as well as the way that everything will unfold. Once you have it in your mind, write it down on a piece of paper. It’s one thing to think about it, and another thing to go through the process of putting it on paper.
A thought can easily be forgotten. However, once you write your goals and intentions on a piece of paper, they become even more real and tangible. They will prove to be ideas that you can feel, touch and see. Put the piece of paper in a place where you will meet it every day to keep these goals fresh in your mind.
Do not focus on expenses
In order to get rid of your debts, you will need to have absolute control of your spending habits. Otherwise, you will find yourself in the same situation in the long run. You can not spend money beyond your means and have enough money to pay your debts quickly. Setting up a budget will help you manage your spending habits.
When creating a monthly budget, make sure it is realistic. If it is too rigid, you will have the misery to adhere to it and you will find yourself again in unlimited expenses. In addition, you do not want to make the payment of your bills inflexible, something that will force you to use credit to pay for necessities like groceries. The idea is to get rid of the debt, not to create others.
Do not stop the debt cycle
Of course, when you want to get rid of debt, it is essential to stop accumulating debt. This means that you must stop using your credit cards or make purchases by credit or by means of loans. In the same vein, it may not be advisable to use a credit card to pay off another card or other debt. Using debt to pay another debt simply increases your debt as well as your interest, and does nothing to reduce the money you owe. It is best to keep your credit card out in an emergency only.
Declare a false state of emergency
If you have an emergency fund, this is not the time to use it towards your debts. Your emergency fund is money reserved for domestic emergencies that will occur at some point in your life, and the repayment of a debt is not part of it. Various situations may occur; the car breaks down, the oven stops working or the roof needs to be repaired.
You do not want to exhaust your emergency fund to pay off your debts so that you do not have options when a real crisis unfolds and you have no money to cover it. The last thing you want to do when you get rid of your debt is to use the credit to cover the small accidents of life and find yourself in the debt again.
Spread the priorities in the wrong way
Sometimes people try to repay their smaller debts first, working from the smallest to the biggest. However, when this is the case, the debts of greater interest continue to increase. Paying debts that have high interest rates first and foremost, like credit cards, and giving them all your attention can help you get rid of your debts much more quickly.
Opt for the minimalist approach
When people receive their credit card statements in the mail, they generally prefer to pay the monthly minimum, believing it’s the best approach to paying off the debt. When you only pay the minimum amount, you end up paying a fortune in interest over time and it will take years to pay off the debt. If you really want to get rid of your debts, it is imperative to pay as much as possible towards your credit card.
Once the debt starts to take a certain proportion, as the bills arrive each month, it becomes easier to leave the envelopes closed than to observe the debt that is growing on a monthly basis. However, having the figures in front of us gives us a better overview and a better idea of the concrete situation.
In addition, businesses sometimes make mistakes. You will not notice these mistakes if you do not review your bills. In the event that you notice an erroneous data, indicate it to your creditor immediately. It is also important to review your credit report every three months to be aware of these inaccuracies.
Getting caught in a trap
Although the option of working with debt consolidation companies looks attractive, these are usually not worth it. Often, these are a source of scams, which rob you of your money and run away with it, leaving you with the same amount of debt and with even less money. Other times, these companies will eventually cost you more than your initial debt, and going through these companies will ruin your credit rating anyway. Most of the time, it is better to work directly with the creditor instead of going through a debt consolidation company.
You can repay your debt and free yourself from the financial stress you are under. You only need dedication, determination and a little time. The repayment of a debt will allow you to finally have control of your life and your financial situation. By avoiding these common pitfalls, you should be on the right track to become financially stable and enjoy the flexibility you desire.