Some of the biggest mistakes people make when paying off debt.
As much as we admire the debt-free, financial-freedomers, most of us will have to deal with debt at some point.
Regardless of the reasons for your debt, owing money is NO FUN.
But, good news, being in debt doesn’t have to last forever!
If you’re desperate to pay off money the quickest way possible, here are some pointers that might just help you avoid a big mistake.
Desperate to Pay off Debt? Avoid These Mistakes
1. Not Making a Plan
Planning to repay your debt can feel so overwhelming, especially if you owe a lot of money. But not making a plan will slow you down big-time.
As hard as it is to face your money problems, you need to figure out how much you owe so you can figure out how much you need to pay back and how you’re going to do it.
I’ve learned from my own experiences planning debt repayment that mediocre planning gets you mediocre results.
Essentially, you can’t over-plan to pay off debt.
If you want to pay off debt, quick don’t try to do it with sheer will power – make a plan and stick to it!
2. Only Paying Off Debt if there’s Money Left Over
Do you treat debt repayment as the thing you do when you have the occasional “leftovers” in your account at the end of the month?
If you want to pay off debt quickly, you NEED to rethink your strategy.
In my experience, you’ll pay off your money faster and more consistently if you put money towards debt early in the month.
A SUPER EASY way to make sure you aren’t just using ‘leftover’ money for debt, is to make your payments automatic.
Figure out how much money you want to repay each month and automate half of that money to come out every two weeks.
If you’re not sure how to do that, your bank can help you out.
Knowing that the money is coming out whether you like it or not will give you more motivation not to spend.
3. Underestimating the Power of Small Payments
I’ve been known to put off paying back money because I felt too poor at the time – but that’s a huge mistake!
I’ve finally just accepted the fact that I can’t pay off debt as fast as I’d really like to, so I’ll have to be okay paying it off slowly.
Even if you can only afford to pay a little bit, decide on a small amount that you’ll put toward debt each month.
Working toward financial freedom slowly is better than not doing it at all!
4. Only Making Minimum Payments
I know I just said that small payments are better than nothing, which they are, making sacrifices is worth it to pay more than just your minimum payments.
A big reason for this is, the higher the balance on your debt, the more interest you’re paying every month.
Additional interest means more of your hard earned money isn’t even paying off your original debt! And you don’t want that.
Get that principal amount down as fast as you can by making larger payments than required.
5. Ignoring the Research on Debt Repayment
Did you know there’s actual scientific research about how to successfully pay back debt? It’s true!
Ignoring what science says about debt repayment could slow down your debt-free progress and leave you spinning your wheels.
If you want to be really successful at paying down your debts, read the research and use it to your advantage.
For example, a 2016 study looked at what motivates people to pay off credit card debt.
That study foundthat when people concentrate on paying off one debt at a time (even if they owe money in a bunch of places) they pay off their debt faster.
This is often called the snowball method of debt repayment.
The snowball method works best because, as the study found out, people are more motivated when they’re paying off a higher percentage of their loan.
For example, it’s more motivating to pay $10.00 toward a $100.00 loan than to pay $10.00 toward a $2000.00 debt.
If you know the science behind debt repayment, you can skip the methods that don’t work and focus on the good stuff!
6. Neglecting Your Budget
If you’re like me, there was a time (maybe it’s right now?) when you tried to pay off debt without a budget!
Maybe budgeting just didn’t seem fun. Maybe it felt overwhelming?
Well, guess what?
Unless you’re rolling in money, you CANNOT pay off debt effectively if you don’t budget your money.
You might still be able to pay off debt very slowly, but it won’t go nearly as fast as if you consciously control your spending and saving.
Until I started budgeting, I didn’t think we had much to put towards debt repayment, but I was wrong.
Now that we’re operating on a fine-tuned budget, we’re maximizing the money we can pay back every month, and it feels so good!
If you’re serious about being debt-free, you need to start a budget.
7. Not Getting a Side Hustle
If you’re truly desperate to be debt-free, then not getting a side hustle could be one of your biggest mistakes.
A side hustle can be anything from babysitting for a couple hours a week to tutoring students, to working online.
My side hustles are kind of all over the place and ever-changing.
But up until I had my baby (a few months ago) I babysit about 10 hours a week and I did medical billing about six hours a week.
The income that I brought in with these jobs wasn’t huge, but it made a BIG difference to our ability to pay off debt and save money.
Even if your side hustle only makes you $100/month, that’s $1200/ year, which could make a HUGE dent in your debt!
If you’d like some more ideas for side hustles, take a look at this post.
8. Not Using Your Extra Paycheck
Do you get paid every two weeks?
If not, you can tune this one out.
But if you do, what are you doing with your extra paycheck?
You know, the one you get when there are three pay periods in a month?
Extra paychecks come about twice a year, and if you’re not using them to pay down debt, you’re missing out!
I know it’s so tempting to take that money and treat yourself, but let’s look at the numbers.
Let’s say you owe $5000 on your line of credit, and you make $3500/month at your job.
If all you did was save two extra paychecks in a year and put them towards your line of credit, you’d bring your balance down to $1500.
I feel a bit sheepish saying this, but this is actually the first year we’re going to put our extra paychecks toward debt. W
e’re budgeting HARD so we can do it, and I’m SO excited.
It’s not easy – we live on a tight budget and it would be so nice to splurge with the extra money, but instead, we’re giving ourselves the gift of being closer to debt-free.
Start Paying of Debt Today
Debt can be incredibly discouraging, can’t it?
But, I’m slowly working to pay off my debt, and you can too!
So get started on your debt-free journey today and be sure to avoid the mistakes listed above.
Make your plan, start a budget, get a side hustle, and put all the money you can toward paying off debt.
It’ll be hard, but you’ll be that much closer to financial freedom!
P.S. What mistakes have you made when trying to pay off debt? Let us know your experiences in the comments.