The internet is full of financial advice. It is easy to be overwhelmed by it to be honest. And much of it revolves around advice for those in debt. We don’t want to confuse matters further, but we thought there were things we wanted to say, as it is a matter close to our hearts. Here are some debt reduction mistakes to avoid.
The most common reason that people cannot rid themselves of debt is the cycle that owing money can create. You pay off some debts, you then get it with interest charges on the remaining debt. You are back to square one. Or just as bad, by using your income to pay off debt, you then need to use a credit card for essentials such as food. A vicious circle. It is easy to be stuck in this seemingly endless loop, and millions are. It is also extremely stressful and demoralising.
There is no magic money tree where we can just get some cash to pay off debts, sadly. So the only way, if possible, is to change your spending habits. You need to change patterns and habits. You need to list every expenditure, and find a way to pay for both debt and essential purchases.
I’ve seen it happen a thousand times. People battle over time, and with discipline and hard work, they get rid of their debt. Brilliant! And then they reward themselves, get a little treat. One things leads to another, and before you know it, they are back in debt again. All the good work, or at least much if it, undone. So this is key should you succeed in erasing your debt. Do not rest on your laurels. Keep the discipline and ensure that you never get caught in a debt spiral ever again. Use that discipline to save and build a safety zone for unforeseen circumstances in the future.
Many of us are stuck in our ways, and make do with what we have. And that includes our credit cards, banks and energy providers. There is no need to, in a competitive market. First off, it is often worth taking the hit of the fee to do a balance transfer on credit card debt. Just ensure that you pay off the balance before the interest rates kick in. Also, many banks offer financial inducements to new customers, so why not consider changing bank, or even your energy provider? You could make and save money, and thus help pay off debts.
Many think when stuck with debt that the only way out of the situation is to earn more money. What they don’t consider is spending less and making what they earn go further, thus helping them to increase debt repayments. Sit down and account for every cost that goes out of your account every month. I guarantee some of the costs will not be needed or necessary. And that money can be used on a much better cause – debt.
This is dangerous, as your debt will not disappear if the card has interest charges. All that happens is that the repayment is replaced with charges, and the balance never decreases – or may even go up. Where possible, always try and make more than the minimum repayment.