5 Mistakes People Make When Getting out of Debt

Friday, November 25, 2011, AM | 2 Comments

If you’re buried in credit card debt, any decision you make can be clouded in fear and desperation. It’s important to take a deep breath and handle your situation with a well thought out roadmap.

No good can come from making a hasty decision. A lot of debt relief companies use this against you and use sales techniques to lure you into the program. Here are 5 common mistakes when trying to get out of debt.

  1. Not contacting creditors

    Over the past year, credit card companies have been coming out with their own internal hardship programs. The first step is to contact your creditors to see if you qualify for any credit card repayment programs. Most creditors will be able to lower your interest rate substantially to get your payments lowered. The great part about this is that you don’t have to be behind to qualify! If you find yourself in a situation where you might fall behind, don’t wait before it’s too late.

  2. Budgeting

    If you’re able to get your payments lowered, it doesn’t end there. Getting out of debt requires you to have a strict monthly budget. I always recommend starting off with a spending journal first. A spending journal allows you to keep track of every single daily expense (even that .25 pack of gum) to see exactly where your money is going every month. Afterwards, you’ll be able to construct a monthly budget you can stick to.

  3. Making Hasty Decisions

    As mentioned above, making a hasty decision into joining any type of debt relief company can put you in a situation that leaves you worse off. It’s important to understand each debt relief option and figure out if it’s right for you.

  4. Close your accounts

    This might be debatable, but I definitely advise everyone to close your accounts if you’re serious about getting out of debt. Some might argue that it’s a bad idea because it affects your credit score, but if you’re truly serious about getting out of debt, who cares! A lot of people tend to forget what the primary purpose of a credit score is: to borrow money. Credit can always be rebuilt, but your financial security can’t.

  5. Write Down Your Goals

    Goal setting should be your #1 priority when trying to pay off your debt. You should clearly write down how much you want to pay off each and every month! Keep in mind that getting out of debt WILL take time. It’s important to take the small victories when you can. It will keep you motivated and on track to get out of debt. Create a financial management plan that details all the steps you’re going to take to pay off your debt? Does it include only eating out 3x a week? Or maybe even looking for at least 3 coupons before you go grocery shopping.

In a Nutshell
You are the only person who can get yourself out of debt. No one is going to do it for you. Take a step back and figure out a clear roadmap on how you’re going to pay off your credit cards. It’s definitely going to be a long journey, but following these simple steps will help you in the right direction.

Author Bio: Kevin is the co-founder of DebtEye, and is a certified credit counselor with the NACC. He is also the author of DebtEye’s blog, which gives unbiased financial advice on how to get out of debt.

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  1. 2 Responses to “5 Mistakes People Make When Getting out of Debt”

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