The average American has about $38,000 in debt right now. For some people, this number is much, much larger.
And when you’re in that deep, it’s very hard to get back out again.
If you’re struggling under crippling debt, you need to get smarter with your money as soon as possible. This might require some lifestyle changes.
Not sure where to start or what to do? We’ve put together this list of seven common mistakes people make when trying to get out of debt so you can avoid them.
So let’s get started.
1. You Don’t Change Your Spending Habits
You can’t dig your way out of debt if you don’t stop spending money.
Always look for new ways to save—even if you don’t think you spend a lot of extra money. Go through your day and find things you don’t absolutely need.
For example, instead of buying a cup of coffee at Starbucks every morning, start making your own coffee at home. That small change could save you up to $2,008 every year.
Coming up with more things you can do at home—or skip altogether—will start adding up. Every penny saved can make a big difference.
2. You Don’t Have a Practical Budget
A budget won’t do you much good if it isn’t practical.
Your budget should address the most important needs first, like housing, health care, food, education, insurance, etc. But make sure there’s enough money left over to put toward your debt.
This might mean you have to cut things like shopping, eating out, entertainment, and other non-essentials out of your budget. That doesn’t mean you can’t have any fun at all, but you can’t have it at the expense of another necessity.
Otherwise, you’ll find yourself falling into more debt instead of coming out of it.
3. You Try to Do It on Your Own
If you got yourself into debt, you might have a hard time getting out of debt on your own. It can hard to recognize poor spending habits, change them on your own, or set up a realistic budget.
So you should find trustworthy, professional help.
Sign up for a debt relief program, such as debt management, debt consolidation, or debt settlement. (But keep in mind, these aren’t magic remedies that’ll make your debt disappear overnight. They take time—sometimes up to five years.)
You can even turn to companies like Bonsai Finance and get a loan to help you pay off high-interest debts that are sucking up your money.
Find people to help you so you stay accountable and make fast progress.
4. You Try to Pay off Multiple Debts at Once
Trying to pay off all your debt at once means you’re only putting a small amount of money to each one. In other words, you’ll be stuck with that debt for a long, long time.
Instead, focus on paying your debts off one at a time.
Put all your extra money toward your smallest debt. Once that debt is paid off, move up to the next smallest debt, then the next, then the next.
Your debts will start disappearing faster than if you struggle to get rid of your biggest one first.
5. You Delay Paying off Debts Altogether
On the flip side, you might get discouraged by the amount of debt you have and put off paying it altogether. After all, you’re already in debt. Another $20 won’t hurt.
Those $20 add up fast. If you aren’t careful, you can find yourself hundreds of extra dollars in debt because of that mindset.
Never put off paying for your debts. Start tackling them as soon as you can, even if you can only pay $50 or $100 at a time.
6. You Put All Your Extra Money Toward the Debt
Prioritizing your debt is important, but that doesn’t mean you should spend every single extra penny you have on it. You still need to set some money aside for savings and retirement.
Even though savings might not seem like a priority—at least a bigger priority than your debt, you shouldn’t skip this step.
Time is an important factor in all retirement plans. If you stop putting money aside for your retirement, you’ll regret it later.
7. You Don’t Prioritize Your Debt
If you want to live without debts, you have to make paying them off a priority. Paying the minimum amount of money you can get away with is fine, but it won’t help you make any progress very fast.
The best way to start making progress on your debts is to pay more money toward them than you need. Instead of most of your money going toward interest rates, you’ll start knocking down the actual debt.
But again, balance this out.
You shouldn’t spend all your extra money on your debt. When you’re creating your budget, you can start figuring out how much extra money you’ll have left over for your debts.
Don’t Make These Mistakes When Getting out of Crippling Debt
Getting out of crippling debt takes time. Whether you follow one or all of these tips, paying off all your debts can take years.
So be patient.
Set a budget and stick to it. Get professional help. Stop spending money on things that aren’t essential. Over time, you’ll start to notice your debt shrinking.
Do you want to learn more about becoming financially stable and debt free?
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