Debt is something that no one wants to experience, but it is a reality for so many people today. This is because life is getting more and more expensive. Plus, people get in debt for so many different reasons. It could be a stupid decision that has got you to this place, or it could be something that was out of your control. No matter what category you fall into, you need to stop thinking about the past, and focus on the future. This is what really matters. Dwelling is never going to get you anywhere. Instead, you need to put together a plan that can help you to move forward and get out of the situation you find yourself in.
That being said, read on to discover some of the most common mistakes that people make when trying to get out of debt so that you can avoid making them.
Trying to pay off all debts in one go
A lot of people make the mistake of trying to pay off all debts in one go. What does this mean? Well, if they have £500 spare each month, they will split this £500 between all of the credit cards they owe money on, rather than attributing it to one card. This is a problem because it makes it more difficult and more expensive for you to pay off your debt. Instead, you should tackle one card at a time. This should be your most expensive credit card, i.e. the card that has the highest rate of interest. Tackle this card first so that your debt is cheaper overall. However, when we say that you should pay one card at a time, this does not mean you can forget about your minimum payments. You still need to meet these each month, and you should set up a direct debit so that you never miss them.
Not having a plan
This links on from the former point in terms of you need to have a plan of action. You need to know what you are going to pay off first, how much you can pay off each month, and when you are projected to be debt-free. The best place to start is with a budget. This should indicate the amount of money you have coming in and the costs going out of your bank accounts on a monthly basis. Make sure you include all expenses, no matter how big or small, because it all adds up over time. This will help you to see the money that you have left over each and every month. Once you have assigned a realistic amount to your living expenses, you will know how much you can comfortably afford to use to pay off your debts on a monthly basis. This will then enable you to see when you are going to be debt-free. In addition to this, it is also advisable to have a monthly payment calendar. On this calendar, you should add all of your payments, so you know what is going out of your account and when. This will enable you to keep track of everything more effectively.
Don’t overlook the option of taking out another credit card
You are probably thinking “that is what got me in this mess,” but wait a minute! If your credit score is not bad, there is a chance that you will be able to take out a new credit card. This article reveals everything you need to know about the best sort of credit cards you should be looking at. This is something you could use to your advantage if you are eligible for any balance transfer offers. This will enable you to move all of your balance on one card onto another card that has no interest for a set period of time. This means you can pay off the card without having to worry about the interest mounting up and up. This is a good way to lower the amount of money you owe in total.
Closing credit accounts when they have been paid off
Last but not least, this seems a logical move. After all, you have paid your credit card off in full, so surely you should close the account and just forget about it? This seems like the best move. However, it can hurt your credit rating. Instead, it is better to have an open credit account with credit available that you don’t use. This shows you are not relying on credit. It also means you are using a lower percentage of the credit that is available to you, which will boost your rating.
As you can see, there are four possible blunders that people make when they are trying to get out of debt. Nevertheless, if you can stay away from these, you can ensure that you get on the right track when it comes to getting out of debt and achieving financial freedom. There is no denying that it’s incredibly hard to come to terms with debt, and you are going to need a long-term vision to get yourself out of this situation. However, once you start making in-roads every month, your motivation will grow and grow, and it’ll all be worth it in the end.