13 Mind-Blowing Mistakes We Make When Paying Off Debt
Paying off debt, as in getting rid of it completely, can be very overwhelming. A big reason for that is the mistakes we make along the way!
If you are in a little debt or a lot, it can be hard to get out of it. At first, we may think it is simple. Spend less money, pay more towards our debt, and voila, we are debt free! No, not that easy!
However, getting ourselves into an avalanche of debt is super easy. Getting out takes some money management skills that require patience! We have lots to learn and practice, and we have to stop making mistakes.
Some of the mistakes we need to avoid are listed below! Some of us are guilty of several, if not all, of these mistakes while some of us are only guilty of one or two. Most importantly, we need to be honest with ourselves about these mistakes and make efforts to avoid them!
To clarify, these mistakes can keep us from achieving our ultimate goal of financial freedom! Stop making them right now!
1: We Don’t Face Our Problem
We need to understand while we are in debt. What got us here? Why do we spend so much money?
For some of us, we feel like we deserve to have the things we want. For others, maybe its emotional spending. You buy things to make yourself feel better!
Moreover, maybe you believe that putting something on credit makes it more affordable. Instead of paying 5,000 dollars right now, I can pay 100 dollars per month!
Maybe you live paycheck-to-paycheck.
Another big thing is knowing how interest rates work and understanding your credit score and how it works!
I used to fall into many of these categories, and they are nothing to make you embarrassed. For instance, I lived paycheck-to-paycheck for a very long time. Why is that you ask? I used to live with a YOLO attitude! You Only Live Once and for sure, if I wanted something I bought it. I did feel I deserved it!
Above all, please face your problem and start avoiding this mistake!
Some of this is discussed further right here.
Paying Off Debt Mistake #2: We Don’t Know How Much Debt We Have
I will be honest; for a long time, I had no idea. I only paid attention to how much my bills each month were. When I sat down and tallied everything up, it was depressing! Mind-blowing if you will! 😊
There are some mistakes further down that will rely on this information so please, above all, fix this mistake and figure out how much total debt you have!
3: We Don’t Negotiate Interest Rates
So, many of you may not know this is even an option. However, sometimes it is, sometimes it isn’t and that all depends on your financial institution.
One of the banks I use and have a credit card with, I call them and ask them to lower my interest rate on my card. They push a button, and either reduce my interest or don’t. However, another bank I am with, that is not even an option.
Also, getting a 0% interest balance transfer card may be worth doing. Transfer a high-interest rate credit card to that and pay no interest for the determined amount of time.
Home equity loans and debt consolidation loans are other viable options to lower your interest rates dramatically!
Certainly, don’t forget to call your utility companies, especially cable and internet, and ask for a better deal!
Above all, take a hard look at your interest rates and try to come up with a solution to lower them!
4: We Don’t Have a Plan
I cannot stress enough how important it is to have a plan!
If you wing it every month, you will spin your wheels and get nowhere fast!
If your goal is paying off debt, then you need to plan how to get there. What are the steps you need to take to get to that goal?
How are you going to pay extra to your debt?
What debt are you going to pay off first?
How are you going to get better at managing your money?
Doing the same thing over and over again and thinking it is going to work is what? Insanity! Above all, change things up, stop making these mistakes, and get to paying off debt and gaining financial freedom!
5: We Don’t Have a Proper Budget
Do you think budgets are for people of low income or those who can’t manage their money at all?
Newsflash! That is very incorrect! Do you know companies have and use budgets? They do this to ensure they make profits! Budgets are for everyone of all walks of life!
Wealthy people use budgets just as well as people with less money do! I would venture to say that most wealthy people use a budget, and that Is one of the reasons they are wealthy!
You can learn more about creating a budget here.
Another thing to note is your organization. Writing a bunch of chicken scratch in a notebook isn’t an effective way to create a budget! I personally use this budget planner and it has everything I need and makes it fun!
Above all, make sure you learn how to and create a sufficient budget at your earliest convenience! A budget is an important, also invaluable tool for paying off debt and reaching our goal of financial freedom!
Paying Off Debt Mistake #6: We Still Use Your Credit Cards!
No brainer, right! Have you ever used one of those credit card calculators that are online? Use one right now and see just how long it will take to pay your credit card off! You can find a calculator here.
The simple fact of the matter is if you keep charging on your credit card and only pay minimum payments, you will likely NEVER pay it off!
Stop using them unless there is an emergency and you are making mistake #7! Above all, do NOT cancel those accounts because that can negatively impact your credit score!
Paying Off Debt Mistake #7: We Add More Debt Due to Not Having an Emergency Fund
Yes, emergencies come up all the time! Way more often than we would like right?
I have an excellent example of this! Last Sunday, my wife came into the house and said there was a puddle under my truck. I went out to investigate and found that my transmission fluid cooler lines were leaking. However, I am no mechanic by any means. Longer story short, 1238 dollars later to the local Ford dealership and my truck repairs were complete!
Having an emergency fund is of UTMOST importance! I should be making this mistake #1! I completely 100 percent feel this is the #1 step to take in any paying off debt plan!
Above all, I believe having one-month wages tucked away is necessary for our financial freedom goal, maybe even more. My objective is to have one month until I get in a better debt situation and then save more.
Most importantly, having that money set aside just saved me from using a credit card or adding to my debt for my vehicle repairs!
8: We Pay Extra Money to Every Bill
Remember that plan we discussed? If part of your plan is to pay a little extra to every bill, you are making a mistake!
Pick a debt, usually your highest interest rate debt, and pay extra to it and only it!
It doesn’t have to be your highest interest either. Maybe it is smarter to pay off your debt with the highest monthly payment? It differs for every situation!
Above all, you have to pick ONE debt and pay it off. Then move onto the next one!
9: We Don’t Cut Expenses
Are you still watching television on satellite or cable? Why not Netflix, Hulu, or any of the several streaming services? Do you watch something on cable that you can’t find online because if not, cut that cable!
Moreover, make sure you only put things in one name. By that I mean, if you have a significant other, and you have internet service, put that service in only one of your names. Once your lower cost contract price is over, cancel your service and get new service in your significant others name.
The wife and I just upgraded to faster internet service and will be paying less! Simply because I am considered a new customer!
Above all, make sure you cut expenses where you can. Cable television isn’t the only area. You can cut costs at the grocery store; you can eat out less, etc. There are hundreds of ways to cut expenses, and forming an effective budget is an easy way to see the areas you should cut down!
10: We Don’t Include Our Significant Other
Another no-brainer! Certainly, you need to include your significant other in all of your budgeting, paying off debt plans, goals, etc.
If you both are on the same page, things will go so much smoother and be less stressful!
Above all, do NOT fight about this. Discuss each of your thoughts and goals, brainstorm and come to amicable agreements!
Paying Off Debt Mistake #11: We Don’t Have a Why
This one is so easy for me. I want a fishing boat!
What is your reason? Is it to save money for your children’s college funds? Do you want to retire early? Do you want to travel the world?
There are plenty of reasons for paying off debt! Above all, make sure you have a purpose, a why, and stop making mistakes and get to work on your goals and implement your plans!
12: We Are Not All In – 100 Percent
Depending on how much debt you have, how deep you are, this process is going to be long and tough! You can’t put in 5% effort and expect to complete this successfully!
We have to give this 100% of our effort. Do NOT give up when things aren’t going as fast as you want. It will take time!
Above all, you have to implement an effective plan and stick to it, through the hard times and the easy! Stick to your plan with 100% effort!
Paying Off Debt Mistake #13: We Don’t Make Extra Money on the Side
Try to find ways to make some extra money on the side. There are hundreds of ways to make some side money!
One of my personal favorites is Survey Junkie. You earn points for taking surveys! However, I will say that you or I will not get RICH by doing this, but I do routinely earn over 100 dollars per month just casually taking a few surveys a day.
Another great way to earn some extra income is Swagbucks. Earn some extra cash by watching videos, playing games, online shopping, and more! You have nothing to lose to check it out and see if you like it!
Have you ever heard of Ibotta? Earn cashback on your everyday purchases! Ibotta has paid over 500 million dollars to its users so far and counting! On top of that, this is super easy to use!
Another way to make some extra money is to not spend the money in the first place! What is that saying, “a penny saved is a penny earned?”
That is where Trim comes in! I have been using Trim for quite some time, and it is fantastic!
What does Trim do? Firstly, I want to say, Trim is secure! I personally have not had any issues with using it. So, Trim will scan your accounts and find subscriptions that you may have forgotten about. Then with a simple text, it will cancel them for you!
Trim will also negotiate with your cable, internet, and cell phone providers to save you some money! I am on track this year to save over 500 dollars just through Trim, only from the savings it negotiates for me!
Trim does so much more; I will need to write an entire article to cover it all. I cannot recommend this service enough. Sign up for Trim right now and start saving money!!
Above all, no matter how you do it, or where, you need extra money to make this journey as short as possible! I don’t suggest doing anything illegal for extra cash!
These mistakes are a lot to soak in! However, I know we can all do this!
Most importantly, we all need to stop making these mistakes! This list isn’t even all-inclusive. There is so much to learn about personal finance!
At the end of the day, our goal is paying off debt! We will gain financial freedom! We will chase our Dreams and turn those Dreams into our Reality!
YOUR TURN – What mistakes do you make that that we should add to this list? What have you learned about personal finance that can help all of us? Please leave a comment!