If you’re reading this article, chances are you’ve been struggling with debt. And if that’s the case, there is a good chance that your financial mistakes have contributed to it. Don’t beat yourself up about it! There are plenty of ways to save money and get out of debt without too much trouble. It’s important to be aware of these potential pitfalls so you can avoid them at all costs!
Let’s dive in so you can start saving money in no time!
1. Opening additional credit cards
Opening additional credit cards so you can buy something you want can be tempting if you are already in debt, but this is one of the worst money mistakes to make. Why? Lots of people fall into this trap because they think they’ll be able to make up the money somehow in the future and it won’t affect them right away. This leads to more credit card bills and oftentimes missed payments. Credit card debt can become a slippery slope that leads to major credit problems in the future, impacting your ability to get a car, buy a home, or even purchasing more simple necessities you need from time to time.
Pay close attention to where your hard-earned money goes each day. High-interest rates will cost you if not repaid immediately, leading to an overspending cycle that’s hard to break free from.
With all these ads for buy now pay later deals up on every television screen and internet ad popping up in front of your face, it’s easy for people who are feeling financially challenged to say yes when they need or want something they can’t really afford. You might live to regret it – adding extra debt can have big consequences, especially if you can’t pay it off.
2. Not paying down credit cards each month
Lots of times, people will only make a minimum payment on their credit card with the plan of paying it off or paying it down next month. Unfortunately, that never seems to happen and month over month the high credit card utilization continues to chip away at your credit score.
Not paying down credit cards each month is one of the worst money mistakes you can make when you’re in debt. It’s important to remember to make payments on your credit card bills so that you’ll be paying them off gradually and paying less interest. This way, you’ll still have some money left over for emergencies or more important purchases.
Pro-Tip: You should aim to be under 30% credit usage on each card at the end of every month.
Subsequently, another key money mistake that many people make is paying off their credit card bills only once a month. This means that you’re paying the entire monthly bill at one time, which can be bad for your budget because you’ll end up paying interest on the whole purchase. It’s much better to make payments on your account balance each month, even if it’s just a small amount. By paying more often, you’ll be less likely to rack up interest rates and penalties.
3. Not paying monthly payments on time
Another money mistake to avoid is paying monthly payments on time. Not paying monthly payments on time can be costly because it will cost you more in the long run with higher interest rates, late fees, and credit score impact. If you don’t want to pay more than necessary, make sure to pay your monthly payments on time!
One of the worst money mistakes to make when you’re in debt is not paying your monthly payments on time. If you are late, they can charge you hefty fees or even raise your interest rates. The worst part is that it might take years to pay off your debts completely. The longer you are paying interest instead of paying off the principle, the worse it gets.
One way to avoid paying late fees is by paying your debts first when you get paid each month. Make a commitment to pay at least 10% of your paycheck off before paying any bills or buying anything. This way, you won’t even get the option to spend your hard-earned money on more nonsense and get yourself further in debt!
Make paying monthly payments on time a priority. If you are paying your bills late, it will have a negative impact on your credit rating. This will result in paying higher interest rates for future loans.
4. Spending money you don’t have
Many people make the mistake of spending money they don’t have, which can lead to a lot of debt. When you spend more than you earn, it will eventually catch up with you and affect your ability to pay off your debts. If you find yourself spending a little extra here and there, it’s best to save that money in the bank or somewhere else safe.
An example of spending money you don’t have would be buying that new video game or a new outfit that’s currently on sale. If you don’t have the money to spend right now, try to avoid paying for it with credit or debit cards because paying off that debt can be very difficult.
5. Getting into debt to buy things you can’t afford (i.e., clothes, food)
It’s easy to get into debt if you think that you need certain things before paying off all your debts. If you find yourself spending money on these luxury items, it’s important to save up so you can pay off your loans first before purchasing other things you want! This is not only a bad financial mistake but also an expensive one.
If you don’t prioritize paying off your debts, you’ll end up with more loans and continue to rack up debt. Make sure that paying off debt comes before buying new things so you won’t fall into the trap of paying too much in interest! This means making minimum payments on time and paying off credit cards each month so you won’t be in debt forever.
Credit cards are convenient to have around when you’re shopping, but if you’re not paying them off each month then you’ll be paying for your purchases in the future. Even just paying the minimum payment every month will add up over time and leave you paying more in interest than you originally spent on the goods. It’s best to only use your credit card when it’s an absolute emergency so you can avoid paying them off later on.
The 5 worst money mistakes to make when you’re in debt are paying off credit cards each month, paying monthly payments on time, paying what your car is worth for a loan, not spending money that you have and getting into debt just so you can buy things that go beyond your budget. Luckily there’s an easy way to avoid these costly errors by following the steps outlined above! Let us know if we can help with any of them or if you need assistance setting up a sound strategy for paying down debt quickly. We’re here to partner with you every step of the way as long as it means helping clear away some financial burden so you don’t get weighed down by loans and high-interest rates ever again.
