Debt is an unfortunate circumstance that many people find themselves in, especially if they are trying to handle more responsibilities than they can manage on their own. And while managing your debt can be difficult, it is not impossible to get yourself out. The following are three very common mistakes that you must avoid in order to better manage your debt and increase your chances of relieving it.
Ignoring your creditors
It is a very common instinct to ignore phone calls, emails and letters from creditors when you are in debt—the most common rationale for ignoring creditors is that if you ignore them, you will have more time to get yourself together. But ignoring your creditors is the opposite of what you should do if you are in debt.
Instead, you should actually call your creditors and explain your situation to them. Tell them if you’ve lost your job, or if you had a sudden emergency medical bill that has devastated your finances—most creditors are more than willing to work with you if you show them that you are willing to work with them.
Emptying out emergency or savings accounts
Another common mistake is to turn to emergency accounts or savings accounts and deplete them in order to cover debt. While this may fix the immediate problem, it will only create further issues in the future when you need those savings or emergency funds. To keep most of your savings intact, take out a manageable, minimum amount and put that towards more pressing debt rather than emptying the account.
Sticking to minimum payments
Minimum payments may seem like a great idea; after all, all you need to do is pay a minimum amount a month and you won’t be faced with debt collectors or creditors. The trouble with minimum payments is that they actually create more debt in the future by adding high amounts of interest to your debt every month. And if you are only giving the minimum payment for multiple lines of debt, you are setting yourself up for massive debt that will be even harder to solve.
Instead of paying the minimum, pay as much as you can every month, even if you aren’t quite reaching the full payment. This will help you avoid that crippling interest and go further each month to removing your debt.