Do you find yourself being suffocated by a fierce sea of loans and bills? If you are, then you are certainly not alone. According to a 2015 report by The Pew Charitable Trusts, about 80 percent of Americans are into some kind of debt. Many of these debtors find it difficult to create a good financial future for themselves and their loved ones. We will provide the most common mistakes people make when trying to get rid of debt fast and go through each separately.
Most common mistakes people make when trying to get rid of debt fast on their own:
- Sticking To The Same Spending Routine
- Halting Contributions To Retirement Account
- Refusing To Keep Emergency Savings
- Failing To Authenticate Your Credit Report
- Registering For Debt-relief Programs Without A Deep Insight Of What They Mean
- Attempting To Settle Many Debts At The Same Time
- Terminating Your Credit Card Accounts As Soon As They Are Settled
- Refusing To Be Committed
- Waiting Till You Have More Money
- Bad Priorities
Debts are actually all around us, from the student loans and credit card bills to the huge home mortgage and car loans, etc. It is quite hard to avoid debts, moreover, it is almost impossible to make payment for all primary purchase completely. But, one thing that is definitely possible is financial freedom.
Mistakes People Make When Trying to Get Out of Debt Fast
The journey to paying off debt can be long and stressful as you make up your already hazy mind on which expenses to reduce and that which you need to totally discard. Making those difficult decisions isn’t quite easy, but it is a necessity if you wish to get out of that debt of yours. Living a debt-free life can boost your health, work, relationship, and almost all areas of your life. Have it in your mind that getting yourself free from the shackles of debt involves more than simply settling some credit cards.
You will need to make up your mind regarding some crucial decisions along the way and these choices can have a huge effect on your financial future. Several individuals begin with the best intent, but the terrible decisions they make stop them from freeing themselves of their debts. Below are 10 common mistakes people make when trying to come out of debt quickly on their own.
Sticking to the Same Spending Routine:
You surely can’t execute the same task continuously and expect different outcomes. To free yourself from the shackles of debt, you need to be aware of your spending power. Don’t go on and spend money on something that is way above your budget or spending power. Also, it is important that you change your spending habits so that you remain within what you can afford.
Making a realistic budget is an effective way to prevent unnecessary spending. Go through your expenses and select that which are important and the unimportant. Cutting your daily spending a little can make a huge difference.
Halting Contributions to Retirement Account:
Getting out of debt can be easy, with the right decisions of course. It might look wise to commit all your savings into settling your debts, but ignoring your retirement account can end up being a terrible mistake on the long run. Retirement savings can be of a great help to you when you stop working. The sooner you start building your retirement savings, the better off you will be.
Refusing to Keep Emergency Savings:
One effective way to get out of debt is by having reserve or emergency savings. An emergency fund is an amount of money that is set aside for emergency situations. Money that is meant for unnecessary or lascivious spending should be saved in case of any emergency. These emergencies can come in several forms such as a envisioned car repair or an unexpected visit to the doctor.
Having an emergency fund would reduce or completely discard the need to borrow, thus providing you with extra money for your emergency needs. Of course, it might take a while to save adequate cash to pay your monthly bills, particularly when you are keen to get out of debt, but what you should know is that every little amount of savings will eventually add up.
Failing to Authenticate Your Credit Report:
Do you take out time to constantly affirm or authenticate your credit card report? If you don’t, you are making a huge mistake; while if you do, kudos to you! It is quite important that you verify your credit report so as to prevent unnecessary errors. You can either do this yourself, or seek the help of a credit assistance company. Such companies help you identify mistakes on your credit report and provides advice regarding your credit score.
A credit report is basically an extensive statements of a lender’s credit background from a variety of sources such as banks, credit card companies, etc. Each year (every 12 months) you will be presented with a free copy of your credit report from the three most significant credit bureaus. Make sure you take advantage of this. Go through them and ensure that the info present in them are accurate. Also, feel free to contact any trust worthy expert to assist with your loan.
Registering for Debt-Relief Programs Without a Deep Insight of What They Mean:
Getting out of debt is seldom a quick and easy endeavor, so if one of those debt-relief program promises to help you get out of debt quickly, don’t fall for it. Rather, consult a trustworthy Business Bureau or other genuine organization before taking part in the program. You should also have it in mind that even the most effective programs takes time to provide the needed outcome, patience is crucial if you wish to get out of debt.
Attempting to Settle Many Debts at the Same Time:
If you have several debts hanging on your neck, you may be eager to settle a huge chunk of each one every month, but not all debts are the same – their interest rates differ. Instead of choosing to settle each debt equally, go for the debt that has the highest interest rate first. You will settle those with lower interest rate later. When that is settled, continue working on those with higher interest rates, one at a time, until you have a manageable expenses.
You should also have it in mind that you will have to make little contributions towards those debts with lower interest rate, but committing a large chunk of your money to those with huge interest rates will prevent the interest charges from increasing.
Terminating Your Credit Card Accounts as Soon as They are Settled:
As you keep on trimming your credit card debt, you may be thrilled at the imagination of discarding your credit card as soon as your debt is completely settled. Make sure you think twice before you make such a hasty decision with your credit card. Terminating a credit source can be detrimental to your credit score which is adjudged by not just the amount you owe, but also on the amount of credit that is at your disposal.
Also, terminating an account will alter the average age of your accounts and this could have an effect on your credit mix. Yes, on some occasions, discarding your credit card may be the best option, particularly if it is one that boast of a substantial yearly fee. One thing you should know is that choosing not to close your credit card and deciding not to make use of it could turn out to benefit your situation.
Refusing to be Committed:
All sorts of debts, be it a credit card debt, a mortgage loan, etc. requires commitment discipline and dedication, particularly when it is huge or one that comes with a huge interest rate. If you decide that you’ll be paying off your debts only when it seems comfortable for you to do so, then you aren’t ready. The truth is that settling debts is harder than you think. It is like working on your fitness and refusing to stick to certain diet. It is quite exhausting and it is a sacrifice, but the outcome would be glorious.
Waiting Till You Have More Money:
One of the biggest mistake some debtors make is waiting till they make more money before paying off their debts. These people often choose to pay their debts once they get a promotion, or a raise. If you continue to set aside your goals due to lack of substantial cash, they will never materialize. The fact remains that, there exist no time like the present. Even little amount of money committed to pay a certain debt can add up rapidly, and when the raise comes, you will be able to easily get out the debt.
Bad Priorities:
To get out of debt quickly, you will have to set good priorities. First off, getting free from your debts should be your topmost priority. It should be just that and nothing else. Pay close attention to how you spend, and cut down unnecessary spending. At this point, you can’t lavish money – you can’t get that new car, or cell phone until you pay that card debt or whichever debt it is. Yes, those unnecessary things have to wait. Your primary priority has to be to get out of that debt.
As soon as and you seem on the verge of being from your financial shackles, then you can consider making you start getting those debts out of the way – starting with the debt with the highest interest rate and other financial purchases.
How Can I Get Rid of Debt Quickly?
Paying off debt quickly is possible, with the right approach. To do so, you need to get an additional source of income which will be used to compliment your main salary. You also need to consider an effective approach like the snowball method.
Adopting the snowball method:
You can get rid of debt quickly by adopting the debt snowball method. This method is all about settling the smaller debts with your excess funds while making minimum payments on your huge loans. It is an effective way to get rid of debt quickly.
The debt snowball method is for those who wish to pay more than the minimum monthly payments on their credit cards including other debts. The first step to take is to make a list of all your debts ranging from the smallest to the largest. Then proceed to pay off the little debts until they are no more- afterwards, focus your attention on the larger debts.
The debt snowball method enables you to settle the little balances first, claiming some wins for the psychological effect, while giving you the opportunity to save the biggest loans for the last. With this method well implemented, you can probably get out of debt in 6 months.
You can read full and detailed description about snowball method in this – source.
Get a side hustle:
Getting a side hustle can provide you with extra money to settle your debt quickly. You can learn a skill and monetize it to get you some additional money which can be used to settle your debts rapidly. This skill can be babysitting, house cleaning, content writing, graphic designing, etc.
Websites such as Fiverr and Upwork offers freelancers the opportunity to make money from the comfort of their homes. With the additional cash derived from a side job, you can pay off that credit card debt.
Sell all unnecessary things:
Selling things you don’t need can drum up some cash quickly. The cash derived from the sales of those unnecessary items can be used to settle your debt in no time. Most people have some valuable stuffs they don’t use and can do without. Why don’t you sell those extra things you don’t need and use the cash to cut down your debts?
If you reside in an area that allows it, a nice outdated garage sale is usually the cheapest and simplest way to unload those unimportant items for money.
Request for lower interest rates on your credit cards:
If you feel that your credit card interest value are quite high that it feels very hard to make progress on your balances, call your card issuer and negotiate. If you are the type that pays his/her bills on time, you may get a lower rate which means that you have the opportunity to direct more money to your debts and pay them quickly.
Aside from the interest rate mentioned above, you can also negotiate down or expunge other types of bills. Always have it in mind that the worst your card issuer can say is no. The less cash you pay for your fixed expenses, the more cash you can direct towards your debts.
How do I Get Out of $100K Debt?
A debt as huge as $100k can be difficult to settle, but it isn’t impossible. To get out of such a debt, you will have to find any way possible to lessen your borrowing rate which tends to make it hard for you to break free from such debt.
Reduce your borrowing rate (interest):
You can easily get out of that $100k debt by reducing your borrowing rate (interest rate) which tends to make it hard for you to pay off the debt. Reducing your borrowing rate can be done in three ways:
- Requesting for a lower rate from your creditor
- Transferring high-interest credit card debt
- Debt consolidation
The first method is the simplest and it involves contacting your Creditor and request for a lower rate regarding the debts you owe- this can be on a temporal or permanent basis. The other method is the transfer of high-interest debt to low-interest debt utilizing balance transfer card.
Transfer cards provides its users with low borrowing rate or even zero borrowing rate during a promotional period, making it quite easy to pay off that $100k debt. But, these cards always have a fee attached to them and the borrowing rate may skyrocket as soon as the promotional period is over. If you continue to spend on the transfer card after the promotional period, your debt could increase. Because of this, it is advisable that you use this method if you are disciplined enough to resist putting extra spending on the card and if you are prepared to pay the $100k debt within the promotional period.
Lastly, you can lessen your borrowing rate by combining several debts into one monthly payment with a reduced borrowing rate – this is regarded as debt consolidation. There are few popular approaches for consolidating debts, one of which is acquiring a special type of loan regarded as debt consolidation loan or you can decide to liaise with a non-profit credit counseling organization as part of a debt consolidation strategy.
How to Pay Off $5000 in Debt Fast?
A $5000 debt can be settled in no time. Doing so all boils down to discipline and planning. Limit the way you spend and stay away from unnecessary liabilities so you will have adequate cash to settle your debt.
Freeze your credit use:
If your credit card is always in your wallet, remove it and store it somewhere else. If the plastic is not always with you, you won’t be tempted to use it. This way, you will spend less and have adequate money to settle your $5000 debt.
Make a safety net:
Begin small and aim to save around $1,000 in a savings account. Owning a cash cushion like this would prevent you from charging expenses to your credit card when emergencies arise.
Create a plan:
If the minimum payment is what you make, you won’t settle the $5000 debt because of accumulated interest. What you need to do is to raise those payments little by little, to attain $500 a month, specifically. Terminating cable, reducing how you eat outside or stopping coupons are actions that are beneficial. You can also sell irrelevant items online to generate cash. Taking up a side job is another way to make extra cash to settle that $5000 debt of yours quickly.
Get in touch with your creditor:
Check if combining your entire balance to a credit card that boast of a lower APR is beneficial. If you need someone to assist with your credit, you can get in touch with a trustworthy credit counselling agency.
Carry out the plan:
If you own a credit card, your journey is straightforward. Use all the additional monthly money in your new budget towards the credit card until your debt is settled. If you own several credit cards, consider paying as much as you can on the card that has the highest borrowing rate and minimum payments on the remaining. You can make monthly payments, if you wish, provided you make constant effort to lessen the debt.
How to Get Out Of Debt With a Low Income?
With the right strategy put in place, you can get out of debt on a low income. It all involves getting additional source of income to compliment your little income and sticking to a strict budget.
Make more cash:
Making more cash, either by getting a side hustle or creating a small business, is one of the best ways to pay off debts. You can consider taking up side hustles like cleaning, mowing, etc. Or you can become a freelancer and work from the comfort of your home.
You surely need the extra cash gotten from these side hustles to get out of that debt. Merging the money derived from those side hustles with the little derived from your main job would amount in substantial cash which can be used to pay off your debt. After clearing your debts, you can stop the side hustle.
Spend wisely:
Closely examine your spending. If you want to get out of debt with that little income of yours then you have to learn how to spend wisely and save up cash for your debts. Do you pay much for parking? Do you have a satellite radio in your vehicle that you seldom use? These things are unnecessary and should be cut down so that you can have enough money to settle your debts.
Stop accumulating more debts:
With that low income of yours, it would be unwise of you to take on more debts. That denotes refusing to take car loans, refusing to take pre-approved credit offer, and waiting till you are capable to purchase something you would usually charge. Do not accumulate more debts until you have settled all your existing debts.
