Okay, so you have debt. Itâ€™s frustrating sure, but itâ€™s not the end of the world. Millions of people are in the same boat right now, and many of them are steadily working their way toward being debt free. You can do it too. No matter how you got into debt, you can make it out. Maybe you bought a car on credit, maybe you paid for your education with student loans, maybe you used credit cards at the mall one too many times. Whatever the cause, thatâ€™s all in the past. Now itâ€™s time to move forward.
As it turns out, the key to reaching debt freedom is to avoid making these 5 common mistakes that some people make with their debt. We learned these mistakes while building ReadyForZero, a free online tool for helping you pay off all your debt:
1. They Donâ€™t Negotiate
Itâ€™s surprising how many people donâ€™t think to negotiate the terms of their debt repayment. If you have credit card debt, itâ€™s one of the first things you should try. Hereâ€™s how: you start by calling up your credit card company and asking for a lower interest rate. It sounds simple, but lots of people never do this â€“ and it can save you hundreds or thousands of dollars in some cases. You can use our handy guide to lower interest rates to prepare before you make this call.
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Here are some other instances when it helps to negotiate: if you have medical costs and can pay a fraction of the amount up front (in cash), try negotiating for a lower payment. Certain health providers will agree charge you a lower amount if you can pay with cash right at the beginning. Read our complete guide to negotiating medical debt to learn more.
You should also know that if youâ€™re struggling to make payments, there may be help available if you ask for it. For example, federal student loans are eligible for the Income-Based Repayment plan, which can drastically lower your monthly payments. And you can always ask for forbearance on student loans, car loans, or even credit cards.
2. They Think â€śEveryone Is Doing Itâ€ť
One of the ways people get into trouble with debt is by assuming that â€śeveryone is doing it.â€ť This can come from seeing your friends and family getting themselves in debt or from going to the mall and seeing everyone buying expensive clothes and gadgets with a swipe of the olâ€™ credit card. It can be tempting to think â€śI guess everyone else is in debt, so itâ€™s okay if I am too.â€ť But thatâ€™s an impediment to becoming debt free. Instead, you should take on the belief that you will not be satisfied until you have paid off every cent of your debt â€” no matter what anyone else is doing.
3. They Assume They Can Pay Off Debt Without Having a Plan
Too many people think they can pay off debt without having a plan. But usually, you canâ€™t! Thatâ€™s why we recommend using ReadyForZero to make a personalized plan for paying off your debt and building wealth. The reason this is so powerful is that you actually create a plan to show you how much money to pay toward each of your loans and credit cards every month. You also get email reminders sent to you from ReadyForZero that ensure you will not forget any payments. Donâ€™t make the mistake of failing to pay off debt because you never made a plan!
4. They Forget to Change Their Attitude
This can be one of the hardest mistakes to make and one of the hardest to learn from. The reason is that humans donâ€™t like change. For the most part, weâ€™re comfortable with where we are right now. But for those of us in debt, usually we have to change our attitude to change our outcome. We have to start thinking in a new way and change how we look at money. The best way to accomplish this is to proactively decide how youâ€™ll incorporate new beliefs about your finances into your daily life.
5. They Juggle Other Priorities
When your goal is to get out of debt, itâ€™s usually necessary to make it your #1 priority. Too often, other things â€” like convenience, new toys, travel, etc. â€” can get in the way of your debt payoff. As fun as it is to take a vacation or buy the latest tech gadget, these things slow down your debt repayment and may keep you in debt indefinitely. Youâ€™ll need to do without these things and focus 100% on your debt if you want to pay it off as fast as possible. To help you keep your priorities straight, itâ€™s always a good idea to rely on a budget. If you donâ€™t have one yet, use our guide to creating a budget. And remember, your budget should empower you to spend on the things that are important to you. If becoming debt free is important, then you can make it a priority.
No matter where you are in your debt repayment (or how you got here), you can get out of debt! Just be sure to avoid the 5 common mistakes discussed above, and youâ€™ll be on the fast track to getting out of debt. And if youâ€™ve already made one (or a few) of these mistakes, not to worry â€” you can still get started today on your new path to financial freedom.
As always, let us know in the comments if you have any questions.
Image credit: Creative Ignition
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This post was published by Ben, Content Manager and Writer for Â»Â ReadyForZero.
ReadyForZero is a company that helps people get out of debt on their own with a simple and free online tool that can automate and track your debt paydown.Download