Debt has a horrible way of sneaking up on you. While there are plenty of things you can do to escape its clutches, there are some tempting “fixes” you must avoid at all costs.
Source – Unsplash – Anh Nguyen
To ensure you don’t inadvertently make things worse while trying to make them better, steer clear of the following five mistakes people make when they get into debt:
1. Payday Loan Panicking
When you panic, you don’t tend to think any further ahead than the moment you are in. This can lead you to act in ways that aren’t healthy for your future self.
When it comes to getting into debt, you may react without thinking and get a payday loan. This could leave your future self dealing with a ton of interest, making it harder for you to get out of debt long-term. Take a moment, take a breath, and research alternatives to payday loans. You’ll be surprised at what’s out there.
2. Comfort Spending
We are all creatures of habit, so it makes sense that we might get into debt but continue to spend in the same way that landed us in financial trouble. Buying from the same high-end shops, spending huge amounts of money on a gas-guzzling car, eating out when you really can’t afford it. Though these treats may be comforting, their familiarity is at the heart of your problem. Start making changes to cut down your spending and you’ll “discover” more money which you can use to pay your debt.
3. Secret Keeping
Many people feel ashamed when they get into debt. This leads to them feeling the need to keep their financial dramas a secret, which has a far more profound effect than you might imagine. Secrets of this nature are like poison for the mind. Statistics tell us that those who die by suicide are eight times more likely to be in debt. Don’t let this situation overcome you – you do not have to suffer alone.
The hardest part is talking about it, but once you have, you will feel so much better. If you aren’t ready to tell your family and friends, speak to a debt charity first. Knowing you have a path out of debt will help you feel more confident in talking to your loved ones about your situation.
4. Budget Shunning
It’s wonderful to spend some time daydreaming and brainstorming about how you might save money and begin to get out of debt. However, you will struggle to actively work towards reducing your debt if you don’t make your strategy tangible with a budget. Avoiding budgeting is a huge mistake as it makes your efforts far too haphazard. It also makes it hard for you to keep an eye on things.
5. Account Closing
There’s a definite kick to be gained from finally closing down an account you’ve managed to pay off. But it may surprise you to learn that this isn’t a great move when you are in debt. Your credit score isn’t just judged by the amount you owe but by the amount of unused credit you have available to you. So, if you have credit available in the form of an account you have paid off that remains open, it will improve your credit score.
By following the tips above, you’ll be able to sidestep the most common mistakes people make when they get into debt. By avoiding these pitfalls and taking positive action, your financial situation will soon improve for the good of your family, your mental health, and your future financial prospects.