It's no secret that debt can be a huge burden. Not only does it cost money in interest payments, but it can also weigh on your mind and affect your quality of life.
If you're trying to pay off your debts, whether that be tax debt or credit card bills, it's important to avoid making common mistakes.
Below, A. Fisher & Associates through their site Debt Relief Canada, breakdown 11 of the most common mistakes people make when paying off their debts.
1. Not Defining What "Getting Out of Debt" Means to You
When you're trying to get out of debt, it's important to have a clear goal in mind. Do you want to be debt-free within a certain timeframe? Or do you just want to lower your monthly payments? If you don't have a specific goal in mind, it will be difficult to create a debt payoff plan that works for you. Without a plan, you're more likely to make mistakes that can set you back.
2. Not Prioritizing Your Debts
Once you have a goal in mind, it's time to start prioritizing your debts. In general, you should focus on paying off your high-interest debt first. This will save you money in the long run, as you'll accrue less interest on your debt. You may also want to consider prioritizing debt with shorter terms first. This debt snowball method can provide motivation to keep you on track.
3. Not Creating a Budget
If you don't know where your money is going, it will be difficult to get out of debt. That's why creating a budget is an essential step in the debt payoff process. When you're creating a budget, be sure to track all of your income and expenses. This will give you a clear picture of your financial situation and help you find areas where you can cut costs.
4. Not Tracking Your Progress
It's important to track your progress when you're trying to get out of debt. This will help you stay on track and motivated. There are a few different ways you can track your progress. You can use a debt snowball calculator or make a debt payoff chart. You can also simply keep a running total of how much debt you've paid off.
5. Not Making Extra Payments
If you want to get out of debt quickly, you need to make more than the minimum payment on your debts. Even a small amount of extra cash per month can make a huge difference. When you make extra debt payments, be sure to apply the payment to your debt with the highest interest rate. This will save you money in the long run.
6. Not automating Your Payments
One of the best ways to ensure that you make your debt payments on time is to automate them. When you automate your debt payments, you won't have to worry about forgetting to make a payment. This will help you avoid late fees and additional interest charges.
7. Not Sticking to Your Plan
If you want to be successful in paying off your debt, you need to stick to your plan. This means making your debt payments on time each month and staying within your budget. It can be difficult to stick to your plan, but it's important to stay disciplined. If you find yourself struggling, there are a few things you can do to get back on track.
8. Not Negotiating with Your Creditors
If you're having trouble making your debt payments, don't be afraid to negotiate with your creditors. You may be able to get a lower interest rate or extended payment terms. This can make it easier to afford your debt payments and get out of debt.
9. Not consolidating Your Debt
If you have multiple debts with different interest rates, you may want to consider consolidating your debt. This involves taking out a new loan to pay off your existing debt. When you consolidate your debt, you'll usually be able to get a lower interest rate. This can save you money and help you get out of debt faster.
10. Not Getting Help When You Need It
If you're struggling to get out of debt, don't be afraid to ask for help. There are a number of debt relief options available. You can work with a debt settlement company or enroll in a debt management program. You can also consider filing for bankruptcy.
11. Not Learning From Your Mistakes
If you've made mistakes with your debt in the past, it's important to learn from them. This will help you avoid making the same mistakes in the future. When you're trying to get out of debt, be sure to take things slow and steady. Avoid making rash decisions and always think about how your choices will affect your debt.
Paying off debt is a difficult but rewarding process. By avoiding these mistakes, you'll be on your way to a debt-free life.
