Getting rid of debt is crucial for a happy life. There are different situations that make people dive into debts to banks, friends, relatives, private companies, etc. Now, as you calculate the overall sum, it might scare you. But with enough dedication and consistency, you’ll become a free person in a year or two. When inspired and ready to act, it’s easy to make mistakes if you’ve never been in a similar situation before. But we’ve got you. Below are the 7 most common mistakes you should definitely avoid to get rid of debt in the shortest time.
1. Thinking That Pay-Off Won’t Harm Your Daily Spendings
“So, I’ll save some from my paychecks to get rid of debts, but I’ll still be able to have lunch at a restaurant every day. How hard is it going to be?” Many people who decided to pay off their debts think that it won’t be that difficult if they plan and save. In reality, for the process to go faster and smoother, you’ll have to say “No” to some things.
Make it prepped lunch instead of another restaurant visit. Save on a gym for several months and work out at home. Repair and restyle your clothes instead of buying several new items every month. Maybe opt for a cheaper perfume until you’re done.
It’s inconvenient, we know. But such an approach will save you a ton of money. Some new habits may even make you closer to a zero-waste life and consumer behavior improvement.
2. Using Debt Consolidation Services from the First Company You See
While some service can actually help you get your life back, you need research skills. If, after a thorough analysis of your possibilities and the amount of debt accumulated you know there’s no way you can do this alone, choose a company. But just any firm will help.
Some people who see ads online say “Get rid of $100,000 in debt in a month with us!” actually believe them. Usually, they are desperate and reason their decision with “What if”. Usually, they want to get out of debt programs after that month. Moreover, that might not be easy as well.
Before choosing a program, consult with a financial bureau or another reliable organization that will help you verify the service. You can also find a lot of information on debt consolidation companies yourself. Read whether debt consolidation is working and what services you can use for the good from finance blogs with guest posts by specialists in the industry.
3. Not Checking on Your Credit Report
Every year, you can get a copy of your credit report for free. This means you can check every debt for proper numbers and even more. Many people underestimate this service, but it can be very helpful when you’re trying to get rid of debt.
You can see whether there are debts on you that you didn’t take and other mistakes. If you think you may be a fraud victim, the report will help you verify it.
4. Not Taking Budget Planning Seriously
Planning your budget is one of the most important things to do when you’re looking for a way out of debt. If at times you feel like you’re making enough but the money just goes somewhere, it’s time to properly plan your spendings. Include the monthly installments there to make sure you’re covered for the month.
Also, find a couple of daily finance podcasts that suit your budgeting goals. There, you’ll get multiple recommendations, tips from professionals in personal finance, and lots of motivation to finish the process.
5. Mindless Shopping
Mindless shopping is harmful not only because you spend a lot of money on unnecessary things. It’s an environmental hazard. Much of the stuff or its packaging goes to the trash, ending up in landfills. Plus, you can’t pay off debts because the money just disappeared. Consider what you buy, let the idea settle, and make sure you only get what you need.
6. Not Including Interest Rates in Budget Planning
Never forget about interest rates. Doing so may make you lose more money. When planning the strategies for debt pay-off, always put those with higher interest rates first. As a result, you’ll finish them first and save more money to get rid of the next debt.
Calculate the monthly installments including the rates to be as precise as possible. Otherwise, it will be a surprise when you save, do everything properly but don’t have enough money for the next installment.
7. Avoiding All Purchases and Fun Because You Have Debts
Remember the first mistake where you had to abandon some finance-consuming habits? For people with maximalism, let’s clear this topic up a little. Saving on some habits that you can resume later if you want is great. But sacrificing everything, from grocery shopping and skincare to retirement savings isn’t wise.
How long are you going to live like this without damaging your mental health? A month is OK but it will be difficult. But what if it’s a year? You’ll have to eat the cheapest food, forget about having your nails professionally done, not be able to buy a regular cleanser.
That’s not life. No matter how much debt you have, make sure you balance it and give yourself the little gems of a healthy salmon steak or that skincare product complex. (Men are in for this too. Don’t go cheap on your skincare).
Be Consistent with Your Pay-Off Strategies
Learn how to get rid of debt without engaging in suspicious debt programs and setting aside your whole life. It’s possible if you’re ready to be consistent. Plan your budget, don’t forget to save for emergencies, don’t close credit cards right after paying off not to harm your credit history.
Communicate with banks, look for ways to lower interest rates, and always target the debt with the biggest rate first. See you in your brand-new, debt-free life!