The Most Common Errors People Make When Dealing With Debt

Dealing with debt simply does not come naturally, and it’s not something that everyone has been taught to handle effectively. As a result, it is unsurprising that a few errors will be made along the way.

If you are currently going through the process of managing debt, understanding these errors can be hugely advantageous to your efforts. If you know what not to do, then your own efforts will be all the more successful. Here are the most common errors people make when dealing with debt, as well as advice on how to avoid encountering each scenario yourself…

1.  Overlooking The Help Available

One of the biggest mistakes people can make when dealing with debt is assuming that they have to manage the entire problem themselves – which couldn’t be farther from the truth. Debt is incredibly common, so there are plenty of options available for you to explore; you can get tips for budgeting from an online forum, seek protection from a debt lawsuit from a professional company, and much more besides – you will never have to address debt issues alone.

2.  Saving Rather Than Paying Off Credit Card Debt

This is the kind of issue that, at first glance, doesn’t seem like much of an issue at all, but saving too much of your income can genuinely be an issue if you have credit card debt. The issue is interest: savings accrue interest (which is good), but so does debt (which is a problem)  – and the credit card interest is far higher than you could ever earn from savings. While it’s sensible to make sure you have some money set aside for a rainy day, having both high levels of saving and high levels of credit debt will ultimately leave you worse off, as the credit card interest compounds and leaves you with a higher amount to pay back.

3.  Failing To Track Progress

Many people put plans in place to manage debt, set up the direct debits, and then push the problem to the back of their mind. There’s nothing inherently wrong with wanting a little mental space from debt management, but it does have a downside: it makes it harder to identify if things are going as planned. To really tackle debt, you have to know when your efforts are working, and when you might need to try a different strategy – and the only way to know which course of action you need to take is if you are fully aware of how your journey is progressing. Keep a spreadsheet of all of your outstanding debts and the total amount owed, then update this every time you make a payment.

4.  Continuing To Use Credit

One of the most common pieces of advice for those dealing with debt is to cut up credit cards and close (or freeze) credit accounts so they cannot be used – but many people do not do this. Sometimes, this can seem justifiable – credit cards offer rewards, for example – but it can lead to future spending that ultimately worsens debt issues in the future. At least initially, avoid using credit for any reason, and go cash-or-debit-card only.

By ensuring you avoid the errors above, you should find that your own process of dealing with debt is as smooth and effective as possible.

What do you think are the most common errors people make when dealing with debt?  Leave them in the comments!

Best,

[a contributed post]