It’s never a good feeling when you find yourself in some serious debt. Whether that is from high student loans, overspending, or making some not-so-good financial decisions. The key is to avoid any more debt mistakes, as you embark on solving and beginning to repay any debts you have. If you are not careful, you could end up deeper in debt.
Yes, more debt mistakes can happen to you, but mostly due to lack of proper planning and knowledge. However, don’t get scared! To get out of this debt misery, you first have to identify the mistakes and then use your head to find out the solution.
1. Not creating a proper budget
People normally fall into debt when they spend more than they can afford to pay. Keeping track of our money can be simple, but most of us don’t think it matters or have time to do so.
Your income and expenses can both help you to keep a balance in life. But to keep them both balancing, you need to have a budget. If you don’t take it seriously, you won’t see any improvement in your financial life and you’ll drown into debt very soon.
2. Ignoring the root cause of your debt
Have you ever tried to find out the root cause of your debt mistakes? According to the experts, most of the debt issues are generally caused by these reasons: 1) Unemployment but no change in spending habits, 2) An unexpected surge of expenses like travel for family issues, vet bills for your pets, car overhauling bills, etc. and 3) Bill reimbursement costs that can’t be added to the bill.The tendency to lead a luxurious life with unusual spending habit.
Before finding a permanent solution to your debt problems, you should always find out the reasons for your misery. As you might have started tracking your expenses, prepare a list and find out which of the expenses are costing you more and increasing your total debts.
3. Getting too many credit cards
Most of the people spend too much to get those offers and discounts, thinking that they’ll pay off the credit card bills with a snap of their fingers. But, practically, this is how people fall into credit card debts.
The basic thing is that people don’t have the proper discipline to manage credit cards. So, as a result, they rack up the charges day by day. That balance gradually grows as people continue using their credit cards for buying things.
4. Trying to tackle the debt alone
People normally restrain themselves to discuss their debt problems with anyone else. They even hesitate to involve their friends and family for dealing with debts. While understandable, this is something you might not want to avoid. Financial problems usually can be solved if you get good advice from your close ones.
They even help you to get out of these debt issues by providing monetary help along with other remedies. So, if you are one of those people who doesn’t want to be open with their debt, you can be making one of the most foolish debt mistakes of all.
5. Closing accounts after they are paid off
After choosing the best debt repayment option, you may pay off most of your credit accounts. But if you are thinking about closing those paid off credit accounts, that would be one of your great debt mistake.
The credit scoring system depends on various factors. Your available credit and long credit history are two of the most important of those factors. Once your accounts are paid off, your credit limit will increase automatically. The solution is simple. Pay off the account, but don’t immediately close it. If you feel strongly about closing it, wait for a few months or more then consider it.