5 Mistakes People Do When Trying to Get Out of Debt

Getting out of debt is not an easy journey. It takes time, discipline, and sacrifice to successfully do it. For one, it takes a significant change in financial lifestyle and spending habits if you are determined to get out of debt. This means cutting back on eating out, buying new gadgets and jewelry, and taking vacations — all made more difficult to do by targeted ads everywhere, any time of the day.

While it is undoubtedly one of the most daunting tasks you’d have to do in your life, getting out of debt is possible, provided that you are committed and serious about this life-changing decision. However, just like any endeavor, you are bound to make mistakes. Here are some you would want to avoid to keep yourself on track in overcoming this financial challenge.

Mistake #1: Setting an unrealistic budget.
After committing to paying off your debt, possibly within a timeframe you have set for yourself, you set a monthly budget to work around with now that you are putting aside cash for debt payments. Do not make the mistake of setting an impractical and unrealistic budget to make room to pay for debts. Make sure to take into account all your financial needs such as groceries, housing, utilities, insurance, retirement, emergency fund, and other important parts of your budget. Make sure that the new budget is not too far away from the one you’ve been following for years. Ease your way into it and evaluate if you can set aside a few more bucks for debt payments in the next months.

Mistake #2: Doing the old spending habits.
Since you are working around a new budget, you will need to adjust your spending habits. Start with the little things such as drinking coffee and eating breakfast at home and preparing packed lunches every day. If you shop for new clothes every week, try to limit it to once every month if you can. You might have to remove your browser bookmarks for online shops for now to avoid the temptation.

Mistake #3: Cutting into your emergency fund and retirement savings.
Do not stop allotting money for your emergency fund. With or without debt, you need three to six months worth of monthly expenses for emergencies. Also, continue contributing 5 to 10 percent of your monthly salary to your retirement fund. When it comes to retirement savings, time is your powerful tool, so putting it off or stopping can hurt your retirement years.

Mistake #4: Paying off all debts at the same time.
It’s possible that you have more than one source of debt — may it be credit cards, mortgage, or student loans. It would help if you prioritize paying off the debt that incurs the highest interest. Religiously stick to your budget and pay off your debts one by one, starting with one that has the highest interest.

Mistake #5: Doing it alone.
It’s understandable if you do not find seeking the advice of relatives and friends regarding your finances a good idea. The good news is you don’t have to. There are nonprofit organizations you can get free help from. Credit counselors from these agencies can provide suggestions on debt settlement and management, credit consolidation, and debt-relief programs.

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A message from Payment 1 Financial Corporate Office

The ongoing Covid-19 health crisis is having a dramatic impact on our communities, from the health of our friends and families to our schools and workplaces. 

During these challenging times, Payment 1 Financial is committed to taking action to help you and your family. We’re making every effort to keep our stores open, and our people are following a strict regimen of cleanliness and sanitation. We are standing by, ready to do whatever it takes to help you get through this. 

Payment 1 Financial is limiting our lobbies to two people at a time to help prevent the spread of the virus, but we are also delivering curbside service by appointment. All you have to do is call to schedule your visit—we bring the paperwork to you in your car! Click here to view our locations.

If you find yourself facing financial difficulties due to Covid-19, rest assured that we are here to help. Just contact your local Payment 1 Financial office, and let’s discuss ways that we can assist. 

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For the latest information about Covid-19 and what you can do to protect yourself, visit the Centers for Disease Control online at www.cdc.gov