Debt can be defined as a curse brought on by wrong decisions and a failure to be financially responsible. It is the struggle of paying your bills and meeting your financial obligations. Money problems are a consistent challenge for 70% of Americans, with reportedly 30% suffering severe depression and distress caused by debt.
More often than not, amassing debt is the result of accumulated mistakes and wrong decisions we make in our daily lives. It could be triggered by something as simple as buying a brand new phone while disregarding your actual financial capacity, or going on your travel escapade without proper financial backing.
A mistake cannot be made right with another mistake, especially when trying to climb out of debt. To give you clarity on things not to do when in the midst of clearing your financial obligations, here is a list of common mistakes that people commit while eliminating their debt.
Not Making Lifestyle Changes
Your lifestyle is considered a factor that directly or indirectly prompted your debt accumulation. It could be anything from your habit of spending frivolously, eating at expensive restaurants too often, or simply due to peer pressure for top brands and fashion.
One common mistake a person in debt needs to correct is to adjust his or her lifestyle. Your spending habit is directly related to your lifestyle. If you are really committed to reducing your debt, you need to live within your means or even below it if possible. This would shift some of your money from incurring debt to paying additional on your accounts.
Not Preparing For the Unexpected
Paying off your debt means implementing restraints on your daily budget. This does not necessarily mean you shouldn’t prioritize other financial aspects over debt repayment. For example, if all of your money is directly going to monthly payments, then what will you do if an emergency occurs?
Most likely you are just going to take out another loan that will add another account to your debts. Prevent this mistake by preparing a financial plan before dealing with your debt. It should include enough for your daily needs, setting aside money for savings, and retaining an emergency fund. This will ensure that you’re ready for the unexpected and prepared for the worse.
Still Accumulating Debt In Other Forms
Debt can come in many forms; it could be from the result of your deferred personal loan, student loan, or credit card purchases. A common mistake people who want to pay off all their debt make is continuing to accumulate debts of different types of credit. For example, if you are still relying heavily on your credit card, then you are surely on your way to the cycle of an indebted life.
No one wants to go in circles with this stressful situation. It will only leave you on the edge of your sanity. The best thing to do is to stop using your credit card. Using a credit card while trying to pay off your debt may feel like you are meeting your means, but in reality, it is actually keeping you stuck in the cycle. Consider taking out a personal loan to consolidate your credit card debt, and any other accounts you may have, into one total amount with one monthly payment. This single payment is usually smaller than the combined payments of all of your debt.
Going All Alone
There is no shame in getting help, especially when it comes to money. If you think that your financial direction is out of hand, then you need to seek professional help, or at the very least, support from your family. You can take meet with a financial counselor to help you through a difficult financial time. There are many organizations and institutions that can lend you a hand.
It is better if you reach out to an institution that is related to your industry, location, or profession. For example, if you are a service member, there are programs offered through military programs that can help you. They can give practical solutions and provide proper debt management information that will surely give you a boost in reducing your debt.