Long time no see, my wonderful grasshopper folks!
I'm (finally) back (after 5 years)!
I cannot believe I've neglected you all for so long. Feels like just yesterday I was slinging tips to you guys on the daily. Well, today I got some advice from the good folks at CreditCage.com in regards to paying off debts and how to not fall into common traps while doing so.
I'm the one of the biggest preachers of never having debt in your life. But the simple truth is that at one point or another, most Americans will have substantial ($10k+) debt in their lives. Below are 7 rookie debt mistakes you'll want to make sure to avoid when paying back your debts.
1. Not Changing Your Habits In Regards To Spending
Humans love repetition. No matter how much we like to think we are unique and love to be "different", we all have habits and habits are hard to break. One of the biggest mistakes people in debt make is not changing the way they spend their money. As Dave Ramsey would say, you have to "do different to get different". You can't expect to live the same way that got you into the hole you're in while you're trying to get out (and hopefully stay out) of the hole! Stay inspired, and make the change!
2. Not Making and Using a Budget
This one is huge. You have to tell your money how to work for you. Start telling your money where to go and what to do instead of sitting around wondering where it all went. Budgeting is planning and not having a plan is planning to fail. Ask any millionaire if they became a millionaire without budgeting for success. You wont find many (or maybe any) because successful people are proactive and not reactive people.
3. Not Seeking Help When Needed
Let me just say up front that you don't NEED the help of a professional to get out of debt. But if you are unwilling to do the hard work and research yourself, you stand to benefit from letting a professional help you. Yes, this costs you money, but letting a reputable company like Lexington Law take over your debt relief plan can save you money in the long run versus you wandering through life not really trying. Remember, "proactive, not reactive", right Take control of your life or get some help!
4. Not Having an Emergency Fund
I'll be the first to admit that I did not have an emergency fund for the longest time. It's a hard thing to see the need for when you haven't had an emergency in your life yet. But that's the point, you can't predict and emergency. You should have 3-6 months of your life expenses socked away in a money market account where its only job is to BE THERE when you need it. This should be your priority 1 along side with paying off your debts. You don't want to be caught in an emergency with no fund and then have to dig your debt hole that much further.
5. Paying Multiple Debts at Once
While this sounds like the right thing to do, attempting to pay off all your debts at once will actually result in you getting out of debt slower. What you want to do is pay the minimum on all of your debts except the SMALLEST debt you have. Squeeze every penny you can into paying off that one. Then rinse and repeat. This will result in a faster speed of paying off ALL of your debts by using this method.
6. Buying Things You Don't Need
This one is common sense so I wont spend a ton of time on it. If you're in debt you should only be buying the necessities in life. Don't be spending money on movie nights, ice cream, alcohol, etc. DEBT FIRST. Get out of debt then focus on entertainment later.
7. Not Making Debt The Most Important Thing In Your Life
Each month you let go by without getting out of debt makes your situation worse. You need to be squeezing every extra penny from your budget into paying off your debt as quickly as possible. Don't be paying just the minimums, that's the fastest way to dig your hole deeper. Debt is a serious problem and you need to treat it like the most serious problem in your life. Because it is! Don't let debt swallow your life. Focus today!
That’s it for today folks! I know it's been a while since I posted but I hope to get back to updating this site more often in 2018-2019! Let's get to work.
To your financial success,
— Kung Fu Girl