The main problem that have been maiming majority of the American households is debt. It is true that the cost of living has become exorbitantly high. However, this too cannot be denied that most of the people tend to use credit cards on a daily basis, thereby ricking up huge debts. Life cannot go on normally if your debt amount has outgrown your limits. You will have to try and pay down your debts as much as possible. Those who fail to pay down the bills owed (due to poor financial condition), are ultimately required to file bankruptcy. Therefore, it is better and wiser to avoid debts from the beginning. Still, the question remains as to how you can pay down your debts? Are there any specific factors which you will have to keep in mind, while you are working on reducing your debts?
5 Missteps to avoid
If you have decided that you want to get out of debt, you will also be required to stick to a disciplined life. You will have to enforce immense self control in order to get out of debt. So, the mistakes which you will have to avoid are as follows:
1. Continuing credit card usage - While trying to pay down your debts, you will have to avoid using the credit cards. In fact, it is not only about the credit cards, but also about any of the other debt types. If you cannot put a stop to the incurrence of debt, it would never be possible for you to live a debt free life. Credit cards are however, the most common form of financial tool which easily leads you into a huge pool of debt. So, the very first thing you will have to do in order to avoid debt is, stop credit card usage.
2. Canceling credit card accounts - Many people go on to cancel the credit card accounts, as the very first step towards gaining freedom from debt. However, this is a mistake or rather a sin, which you should avoid at any cost. Simply closing down your accounts won’t help. Prior to closing down the accounts, you will have to find out the total debt amount and the root of the problem. Canceling your credit card accounts will result in loss of total credit limit and payment history. This again will lower your credit score, which will result in increased interest rate. This is a chain reaction, which can derail your debt payoff plan.
3. Not following a budget - Not following a budget is another mistake. Budget helps you keep track of your income and your expenses. Thus, it helps you lower the expenses too. Therefore, budgeting can ultimately help you in making debt payments more easily than before. You will be able to free up more money, which can be forwarded to your creditors.
4. Not lowering your expenses - Not lowering your expenses is yet another grave mistake. As you will be required to follow a budget, you will also be required to work on lowering the everyday expenses. You will not only be required to totally do away with the unnecessary expenses (if any). It would be better if you could try lowering some of the necessary expenses too. It is obvious that you cannot do away with the basic necessities, but plan wisely to lower at least some of the expenses.
5. Not devising debt payoff plan - Planning is an important part of the accomplishments of a person. So, in case of debt payoff too, you will have to devise a plan. Avoiding a plan is a deadly mistake, which you should never commit while trying hard to get out of debt.
In addition to the above 5 mistakes, you will also be required to keep in mind that you should not avoid calls from your creditors, or even the collection agencies. Otherwise, you will invite even more problems. It would thus be better for you to take the calls, find out if the debts are valid and then tend to those, as required.
Author Bio: Barbara Delinsky is a financial writer associated with various financial communities and sites. She is an expert in dealing with various financial problems and has immense knowledge of the same. She has written numerous articles on debt problems, getting out of debt, credit rating and score, budgeting, bankruptcy, divorce and so on.
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