Avoid These 16 Common Mistakes While Paying Down Debt

by Andrea Norris-McKnight
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Does it seem like your debt repayment efforts aren’t doing much to reduce those outstanding balances? If you’re making any of these common mistakes, it can take much longer than necessary to get out of debt.

Making some common mistakes while paying down debt can make it harder to become debt-free. Getting out of debt is challenging and requires dedication, discipline and a solid plan. If you can’t seem to make a dent in your debt, you could be making mistakes in any of these areas. 

See if you’re making any of the following debt repayment faux pas. Then take steps to correct them and your debt payoff efforts should become much more efficient.

16 Mistakes To Avoid While Paying Off Debt

If you’re making any of the following mistakes, correct them, and you might be surprised how much faster those balances come down.

1. Failing To Create a Budget

One of the most common mistakes individuals make when trying to eliminate debt is not creating a comprehensive budget. A budget allows you to allocate funds appropriately, ensuring you know where your money is being spent and identifying areas where you can free up extra cash for debt repayment.

If you don’t know where your money is going, making informed decisions about reducing your debt is hard. Start tracking your spending and identifying habits hindering your debt payoff efforts.

These tips for budgeting for debt repayment can help.

2. Making Only the Minimum Payment on Credit Cards

Paying only the minimum payments on your credit cards each month is costly and prolongs the life of your debt. Putting anything that you can beyond the minimum will accelerate debt repayment and save you hundreds or thousands in interest.

Consider taking some of these steps when you can only pay the minimums.

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3. Not Cutting Expenses

The more you can put toward debt each month, the faster you’ll pay it off. Trimming expenses is the easiest way to free up extra cash. Use your budget to find areas to cut back, from food to utilities to vacations. Consider all expenses.

This may mean cutting back on non-essential expenses like eating out, entertainment and shopping, but it will be well worth it knowing how much the extra cash can reduce your debt burden.

4. Adopting a Scarcity Mindset

Adopting a scarcity mindset can lead to feelings of deprivation and eventually result in splurging or overspending. Instead, focus on creating a balanced financial plan that allows occasional small splurges while prioritizing debt repayment.

5. Not Putting Extra Cash Toward Debt

Do you have a plan for using any extra cash you get for bonuses, tax refunds, gifts, etc.? Commit to putting at least half, if not more, of any extra money toward your debt until its paid off.

6. Not Finding Extra Sources of Income

When you can’t cut expenses any further, finding other sources of income may be your only option for paying off your debts faster. It could be a pay raise, part-time job, side gig, or all three.

7. Not Having an Emergency Fund

When paying down debt, many people neglect the importance of an emergency fund, which can be detrimental when unexpected expenses arise. Without an emergency fund, you may have no choice but to rely on credit cards or loans to cover these costs, increasing your debt. Use these tips to build an emergency fund, even on a tight budget.

8. Ignoring the Interest Rates

Interest rates play a significant role in your overall debt repayment strategy. Not prioritizing high-interest debt can result in paying more interest over time. Focus on paying off debts with the highest interest rates first to save money in the long run.

The only time you might want to focus on lower-interest debts first is you have a few small balances that you can wipe out quickly. Then use those minimum payments to put toward your high-interest debts.

Find out more about debt repayment strategies here.

9. Continuing To Borrow

Every time you use your credit card, you borrow more money.

Stop using any credit cards that you are trying to pay off. You’re just undoing your repayment efforts.

If you want the convenience of a credit card, only use one that has no balance and never charge more than you can pay off in full each month.

10. Relying on Debt Consolidation Without Addressing Spending Problems

The one instance more borrowing might make sense is for debt consolidation. Debt consolidation helps some people pay off debt faster and for less interest.

For others, debt consolidation does nothing more than bury them deeper in debt.

Before considering debt consolidation, assess your financial situation and ensure you can avoid running up all of that available credit you will after after consolidating and falling back into debt. This means keeping your spending under control until your debt is under control.

11. Not Having a Plan

Trying to get out of debt without a plan is like attempting to navigate a new city without a map. You need a plan outlining your debt repayment goals, the steps you need to take and a timeline for achieving your goals. Our ebook, How to Conquer Debt No Matter How Much You Have, can help you create a debt payoff plan.

12. Not Seeking Professional Help

For some, managing debt can be overwhelming, leading to poor decisions or procrastination. Seeking the advice of a financial professional, such as a credit counselor, can provide guidance and help you create a tailored plan for your situation.

Use these guidelines to determine if you’re a good candidate for credit counseling.

13. Failing to Communicate With Creditors

Communicating with creditors can lead to more favorable terms or temporary relief. Ignoring your creditors or avoiding their calls can escalate their collection efforts and negatively impact your credit score. Here are the steps to take when a debt collector calls.

14. Not Tracking Your Progress

Monitoring your progress can help you stay motivated and identify when to adjust your payoff strategy. Failing to track your progress may result in a lack of accountability and hinder your ability to reach your debt-free goals.

15. Not Addressing the Root Cause of Debt

It’s essential to understand the factors that led to your debt in the first place. Failing to address these underlying issues can result in a continuous debt accumulation and repayment cycle. Identifying and addressing these root causes is crucial for long-term financial success. See Do You Have a Relationship With Debt?

16. Giving Up Too Soon

Getting out of debt is a marathon, not a sprint. It takes time, patience, and persistence to become debt-free. Don’t give up if you hit a roadblock or a setback.

Which Mistakes Are You Making While Paying Off Debt?

Avoiding these common debt payoff mistakes can help you stay on track and reach your debt-free goal. Remember that getting out of debt is a journey; the key is to stay focused, disciplined and determined and have a debt payoff plan to keep you on track.

Reviewed July 2023

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