5 Common Debt Mistakes and How to Avoid Them
Most people will have debt at some point in their lives. And some form of debt isn’t always a bad thing, but mismanaging it can spiral into a problem. Whether you’re dealing with credit cards, loans or store cards, it’s important to recognise and avoid common debt mistakes.
I’m going to highlight five common debt mistakes so you can try and avoid them.
Debt mistake 1- Ignoring your debt
One of the most common mistakes is trying to ignore it altogether. It can be tempting to put off dealing with it, especially when it feels overwhelming. But if you bury your head in the sand it will come back to haunt you, and avoiding your debt will only make the situation worse.
How to avoid it: The first step is acknowledging and accepting it. Take a look at how much you owe and make a plan of how you’ll pay it back. Review your balance, payment schedule and interest rates. From there you can work out how you’re going to tackle it whether that’s by overpaying the minimum balance, consolidating it etc.
Debt mistake 2- Only paying the minimum
If you’re only paying the minimum each month your debt will take a long time to pay off as interest will keep getting added. Your initial balance is unlikely to go down much (if at all), especially on high-interest debts like credit cards.
How to avoid it: Try to budget to pay off more than the minimum payment each month. By paying extra, you’ll reduce your balance quicker and pay less interest over time. If you have multiple debts look into whether the snowball or avalanche method is going to be best for you.
Debt mistake 3- Not creating a budget
It’s hard to pay off debt and manage your finances without a clear budget. Without one it’s easy to overspend, neglect repayments and put yourself into an even worse financial situation.
How to avoid it: Take time to sit down and create a realistic budget including debt repayments. Look at the different budgeting methods available and see which one will work best for you. Track your income and expenses, and see ways you can cut back on non-essential spending. Having a budget will help you stay on track, spend mindfully, and avoid additional financial stress.
Debt mistake 4- Accumulating more debt while paying off existing debt
One of the most harmful things you can do while paying off debt is accumulating more. It may be tempting to continue to use credit cards, or taking out new loans. But this can lead to a never-ending cycle of debt that’s hard to get out of.
How to avoid it: If you’ve set yourself a realistic budget you shouldn’t need to take out more debt. Make sure you’re only spending what you can afford, or what is absolutely necessary.
Debt mistake 5- Not asking for help
Debt can feel isolating, and it’s easy to think you have to manage it on your own, especially if you’re embarrassed of your situation. But keeping it to yourself can push you further.
How to avoid it: If you’re feeling overwhelmed or just want to get some advice reach out. There are some free debt charities like StepChange and PayPlan who can help talk through your situation and help you create a plan. Alternatively a financial advisor, or debt relief company can help you explore options like debt consolidation loans etc.
Managing debt doesn’t have to be daunting
You’re not on your own when it comes to debt, so try to take a step back to avoid feeling overwhelming. Yes you’ll need commitment and to make smart financial decisions, but it’s possible to come out the other side.
By avoiding some of the above common debt mistakes you can take control and work towards a debt-free future.
Have you ever made any of these debt mistakes?
18 responses to “5 Common Debt Mistakes and How to Avoid Them”
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Rhian Westbury
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These are all great tips for not getting bogged down with debt. Even good little reminders if you are in control of your finances
Iāve made all of these mistakes and itās biting me in the A$$. So wish I saw this sooner!
We learn from our mistakes, so hopefully you come out the other side soon x
NEVER only pay minimums! That is a fast track to increasing debt and possibly bankruptcy!
It is the worst feeling when you have debt. I have been there and felt ashamed and scared to ask for help. Asking for help is a big step but so necessary.
Iām guilty of some of these. I wish I had this information when I was younger, itās easily avoided.
I had no idea about debt when I was younger, I could have used this info then too x
Your blog post always have great learnings. It’s so hard for me to budget money and these are very helpfull.
Reading your blog post makes me realize what my problems are. Thank you for making me realize it.
Ugh….. debt. You cant live with it and you cant live without it LOL…. that is what it seems like at least. You have those cards for emergencies and sometimes things stack up and you have to use them. Thank you for these great tips….. I need to get mine paid down.
100%, very few people can live without any debt x
Too much debt robs you of every good thing. I had to go in debt for a financial emergency and am still trying to get out of it. It’s no fun at all.
These are great suggestions! I try to pay more than the minimum, but at the same time I’ve been known to rack up more debt while trying to pay off existing debt.
Ignoring your debt is such an easy thing to do. Out of sight, out of mind so to speak! Thank you for these tips on how to avoid these mistakes.
These are all easy mistakes to make. I prefer to pay more than the minimum where possible when looking to pay down existing debt. It speeds up the process and costs less in the long run too!!
Paying more than the minimum is the only real way to make progress, otherwise you can be paying it off for a long time x
Yes, paying the minimum is the biggest mistake you’ll make in managing credit card debts because this will definitely bury you in finance charges.
As a rule, we only swipe what we can pay in full. We just do this for the points/rewards.
We’re very similar, we use our amex for the points x