4 Mistakes to Avoid When Trying to Get Out of Debt
Being in a lot of debt is a very difficult situation, and it’s certainly one that can lead to a lot of desperation, if not properly managed. While it’s certainly good for a person to recognize the scale of the problem and be more committed to fixing it, failing to approach debt elimination systematically can lead to serious mistakes which could possibly even make things worse.
In trying to get out of debt, here are a few common mistakes that you should take care to avoid in order not to aggravate your situation:
1. Failing to Identify the Root Cause
Even though there are millions of people who are heavily indebted, a large proportion of them fall into a small set of categories such as job losses that were not accompanied by spending cuts, emergency expenses and work expense reimbursements that arrive late and are not applied against the balance.
It’s important that you objectively evaluate your situation and put your finger on what exactly led to the debt you’re struggling with. After that, you can then focus on fixing that problem as part of the overall strategy to eliminate your debt.
2. Trying to Go It Alone
It’s possible to get out of debt by yourself, but it is a lot more difficult and increases the chances of you making a mistake and sliding further into debt. Instead, you can reach out to a non-profit credit counselling agency or a Debt Forum and get help from certified expert credit counsellors who can help you by evaluating your situation and suggesting good strategies you can use to eliminate your debt, including, credit consolidation, debt settlement or, if things have gone too far, bankruptcy.
3. Focusing on Your Credit Score
Many people believe that you have to be carrying at least some balance on your credit card in order to improve your credit score. Actually, what is most important is the ratio of your balance to the limit and how timely your payments are. The point is that the most important figure you need to set your sights on and work hard to reduce is the balance you’re owing. You’re trying to get out of your debt, and that should be your focus, not setting yourself up to take on even more debt again.
4. Thinking You Can Go on As You Were
You can’t. Period. If you’re in a lot of debt, you must first understand that it’s impossible for you to get out of it without making a lot of significant changes to your lifestyle, especially as it relates to expenses. You might have to shop at less expensive stores, limit your entertaining and eat at home more, but the point is that your previous habits got you into the debt (except if it was an emergency, in which case, you’ll still have to adjust to be able to pay it off) and you have to change them in order to get out of it.