Paying off debt is never easy, but sometimes we make it harder than it needs to be. Do you make silly mistakes when trying to repay debt? If so, learn how to fix them here…
Five Common Debt Repayment Mistakes
When you are struggling to get out of debt, the last thing you want is to make things harder than they are already. Yet many people make basic mistakes when trying to manage their debt problems, and end up getting themselves further and further into the mire.
But with a little planning and forethought, we can avoid these problems. So here are some simple tips to help you keep debt problems under control. The most common mistakes that people make when handling debt are as follows:
#1: Not Having a Budget
If you want to get out of debt, you need to create a budget and stick to it. After all, if you don’t know how much you are spending each month, how can you ever hope to get on top of your debts?
Budgeting is the very heart of debt management, and of financial management in general. You need to know how much money is coming in, and how much money is going out. When you know the numbers and understand exactly what your situation is, then you are in a much stronger position to straighten out your finances.
#2: Allowing Debt to Creep Upwards
It sounds ridiculous, but many people end up paying off debt with one hand, whilst acquiring new debt with the other. Clearly, that is never going to work. Now that you understand that you have a debt problem, you really need to focus on keeping your expenses down.
Every time you use a credit card, you are getting deeper into trouble. So pay only with cash instead. Allow yourself a daily cash budget and stick to it.
#3: Becoming Frugal to the Extreme
Of course, being frugal is very important when you are trying to repay debts. But it is possible to take things too far. You may end up making your life so dull and miserable that you can’t stand it any longer.
This is similar to the problem that many dieters have. They realize they need to weight, so they put themselves on a starvation diet, with the best intentions in the world. But after a couple of days, they become so hungry and miserable that they can’t stand it anymore. Next thing you know, they are knee-deep in donuts and cupcakes, and all their hard work is wasted.
Debt management is similar. You need to control your finances, but not to the extent that you make your life intolerable. Allow yourself one modest treat each weekend – maybe a trip to the movies or a small indulgence. You need to keep this under control, of course, but that small treat may be enough to give you something to look forward to each week.
#4: Falling Off the Wagon
Dieters who give into hunger and go on food-binge usually give up their diet for good. Similarly, people on a budget who give in to temptation and buy something they shouldn’t often feel so guilty they abandon their budget. They figure that if they are going to blow the budget, then there is not much difference between blowing it by $100 and $1000.
Don’t give in to that temptation. We are all human, and so we are all likely to make mistakes now and again. But if you fall off the wagon, the best thing you can do is get up and jump back on again right away. Don’t be too hard on yourself for failing, but do try to ensure that it doesn’t happen again. You don’t what these failures to become a habit.
#5: Failing to Think Ahead
We all know that Christmas is coming, and that we will need to buy some gifts. We also know when our friends and relatives have birthdays and anniversaries. And we also know that life is unpredictable, and problems will occur from time to time. The day will come when your car needs a new thingummy-bob and it’s going to cost $500, or your bathroom springs a leak and you have to call in an emergency plumbing.
When you are on a tight budget, it is tempting to ignore these future issues and just focus on the here and now. But we have to be realistic and think ahead. Somehow, we need to put away enough money to cover expenses like Christmas and plumbing bills. These things are just part of life, and we have to plan how to finance them. Just hoping that things will work out is not the answer.
If you don’t plan for these events, then it is easy to guess what will happen. The plumber has to be paid, and your kids need to have their Christmas. So you will do what most people do – put the bill on your credit card and worry about how to pay it next month.
We all know that this is the route to more misery and pain. So don’t just hope for the best. Plan ahead, even if it means making additional sacrifices now.
Put Yourself in Control
When you act responsibly, you put yourself in control of your money – not the other way round. So stop making silly mistakes with your finances, and get your debt under control today .