Debt can be crippling | iStock.com
Too much debt can ruin your life. You may not be able to get a
mortgage for a house, you might face never-ending credit card payments,
and you might even face court action if you can’t pay your bills. Even a
small amount of debt can bring on obnoxious collector calls and make it
difficult to build your credit. If you have wanted to eliminate or cut
your debt, and you’ve tried, but you can never seem to really get your
debt in control, then something might be in your way. Some people find
that it is difficult to cut debt on a
limited budget,
but it is possible to do so with careful planning and smart lifestyle
changes. In addition, if you’re currently overspending, using credit
cards too often, or not keeping a budget, all of these choices can make
it difficult to get out of debt.
1. You don’t keep a budget
Keeping a budget is essential in order to become financially stable,
and to eventually get out of debt. Even if you regularly pay your loan
payments, you won’t be able to pay much extra, or even pay every month,
if you don’t keep track of your spending and stay in budget. Without
regular budgeting updates, you won’t know how much you are spending, or
how much extra you have. This will make it difficult to prioritize
cutting down your debt, because if you are overspending each month, you
will risk going even further into debt.
A Gallup poll found that only
one in three
Americans keeps a detailed household budget each month. If you are part
of this group, and you want to get out of debt, then maintaining your
budget is a great place to start.
2. You don’t set financial goals
Person Hand Inserting Coin In Pink Piggybank | iStock.com/AndreyPopov
Setting financial goals specifically about your debt will help you
have a date in mind to pay off your debt. If you owe a lot of money, it
can feel like you will never pay it off. However, setting a specific
goal will allow you to plan for how much you need to pay off each month
in order to meet your goal. In addition, knowing a due date will help
you visualize the debt disappearing, which can help motivate you to keep
up with your payments.
According to a poll by CreditCards.com, 18% of those polled who were already in debt expected to
still have loans when they died. Thinking like this will certainly not help you pay off your debt, but setting financial goals can.
3. You rely too heavily on credit cards
Credit card user | iStock.com
Credit cards can be helpful and even necessary, but they can also be
dangerous. Because of the high interest rates, using credit cards too
much (especially if you can’t immediately pay the minimum balance) can
truly destroy your budget, and leave you in a long-term debt cycle. The
average credit card debt
includes $1,128 per card that doesn’t carry a balance, $1,164 per
account for U.S. adults with a credit report and a Social Security
number, $3,766 per person for U.S. resident adults, and $5,540 per U.S.
adult with a credit card.
If the majority of your debt is from credit cards, or you rely too heavily on credit cards, you can
reduce your debt
by negotiating lower rates, tracking your progress, paying with cash,
and implementing other ideas such as those mentioned in this article
(like using a budget and making goals).
4. Your priorities are all wrong
Luxury yacht | iStock.com
It’s nice to have a big house and a fancy car, but if you can’t
afford to do so then taking out loans that you can’t afford is a bad
idea. If you purchase more house than you can buy, or you buy a car that
leads to an expensive monthly payment, it can be difficult to stay on
budget and reduce debt. If you are worried about keeping up with your
friends by buying fancy suits or shoes, or eating out all the time, you
will also find it difficult to eliminate your debt.
The good thing is that you can always change your spending habits. If
you’re willing to downgrade your house or your car, and you can stop
impulse or peer spending, you can get your finances back on track and
cut your debt. Too much debt can be hard to live with, but there are
ways to pay your debt down and still have the things you need (and even
some that you want). Doing so requires keeping a budget, changing your
spending habits, and making and keeping financial goals.
Culled from Money & Career Cheat Sheet
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