5 Grave financial mistakes you need to avoid while struggling to eradicate debt
Debt is not something that may just happen accidentally in your daily life. One of the important reasons to get into a debt rut is bad spending habit. Well, most of the people who incur debt are guilty of a few bad financial habits. In US, the consumer debt is rising incessantly and household savings is declining eventually. In this tough economic situation after recession, people who’re living beyond their means for years, may find it harder to make ends meet. So, the Government may encourage the consumers to spend during financial collapse and statistics may compel them to think that spending is normal, but it’s a risky choice. As a matter of fact, if you’ve incurred overwhelming debt and trying to come out of it, you need to avoid some grave financial mistakes to regain control over the state.
Here are some of the serious mistakes you need to avoid while managing debt:
1. Fail to check your credit report and score: Most of the consumers may not be aware of the fact that if they don’t check their credit reports at least three times annually, the erroneous entries may not be detected. When you pay off your debts, make sure you ask the collection agencies to remove the collection accounts from the credit report in exchange of payment.
In order to ensure whether or not the collection agencies have reported your account as “paid in full,” you need to check the credit report thrice a year. You can take out one credit report from each of the credit reporting agencies like Equifax, Experian or Transunion. If you find any discrepancies in the report, then report immediately to the credit bureau.
2. Frivolous spending- Splurging your hard earned money: It’s true that “a penny saved is a penny earned.” You should consider this quote seriously when you’re managing debt. If you indulge into frivolous spending, then you may not be able to pay off your debt. Remember, saving each penny can help to pave the path to lead you out of debt. Next time when you order for a double-mocha cappuccino or stop for a pack of cigarettes, think again whether you need one. Once you start saving money, you can use the fund for paying off your debts.
3. Borrowing money to lead your life: Using credit card is one of the most common methods of borrowing. However, you can complicate your finances if you can’t change the habit of borrowing, while you’re in debt. When you’re already in debt, then continuously borrowing can lead to greater problems. Another trap that indebted consumers overlook is taking out a payday loan. Payday loan seems to be a feasible option when you’re suffering from financial crisis to manage your unexpected expenses. In reality, payday loan is a bad option when you’re struggling to come out of the debt trap. As a matter of fact, you need to be cautious of some grave financial mistakes while managing your debt.
4. Unreliable debt management company: There is a mushrooming growth of the unethical debt management company. These companies are preying on the vulnerable debtors to extract money from them. If you’ve enrolled in debt management programs and the company turns out to be a fraud, then it may compound your current financial problem.
5. Minimum payment pitfall: If you’re planning to pay off your credit card balance, then making minimum balance payment can further complicate your problems. So, avoid making minimum payment traps when you’re keen to get out of the debt rut. You may end up paying much more on the interest if you only make payment on the minimum balance. Therefore, pay of the owed amount on time to avoid the minimum payment pitfall.
Therefore, avoid the above mentioned financial mistakes while you’re in debt as they can further complicate your financial problems. You can enroll in proper debt management programs to eliminate your financial woes and regain control over your financial state. While thinking about enrolling in such plans, just make sure to do your homework before signing the contract.
Author: Barbara Delinsky is a financial writer with abundant knowledge on the contemporary financial world. She loves to write articles and contribute them to different blogs and finances that deal with core financial issues. Some topics covered by her are budgeting skills, how personal finance management can help you get out of debt and many more.