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Debts are a big stressor to most people. When a person has large debts, it is hard to think of anything else. After all, struggling to make ends meet can limit their ability to enjoy life, resulting in health problems like depression, migraines, and even heart attacks.
Unfortunately, getting rid of debt is easier said than done. This may be because of the mistakes people unknowingly make that just aggravate their situation.
1: Paying the Minimum
People do not see the difference if they keep making payments on the minimum amount. Doing that means waiting longer until they clear their debt. Moreover, the danger of going this route is the amount accrued from the interest since the minimum amount only covers a part of the interest accumulated over the years.
Paying the minimum amount on a debt means paying off the interest. It does not pay off the debt and only buys time. Increasing the amount paid each month could easily wipe out debt and interest with enough time.
2: Still Using the Credit Card
Debt will never disappear if people keep using credit cards. Even if they have an allotted budget for these purchases, credit cards might not be helpful. Anyone who has had problems with impulse spending may find it difficult to discipline themselves.
It would be best to stick to cash payments to control one’s money. By doing this, one can literally hold their money and only spend it on necessary things. More importantly, spending by cash can encourage people to live within their means, avoiding unnecessary purchases.
3: No Emergency Fund
No matter how much is saved to pay their current debt, one might have no choice but to take out some money from their savings or swipe their card again in emergency situations. Not having a fund for emergencies can keep people in a vicious cycle.
4: Getting Penalties
Forgetting to pay dues could lead to penalties to pay. If people keep missing their monthly payments, their debt will never end. Make sure never to fall behind by setting reminders on devices or apps. Better yet, automating payment can ensure timely payments and no penalties.
5: Getting More Debts
Debt consolidation involves combining several loans into one and paying for a new loan—a single loan. That could be helpful if people know how to use the money they acquire. However, forgetting about paying the debts first might result in more deficits. Unfortunately, old habits are hard to correct for some individuals.
When choosing debt consolidation, make sure that the money would be budgeted well and go to where they are supposed to be spent. Remembering how difficult it is to pay up current debts can help avoid creating the same mistake again.
Conclusion
Clearing up debt can be challenging, especially since discipline and strategic budgeting are necessary to do so. Many do not know where or how to begin, while others admit how they lack the skills to do it effectively. The great news is that there are many ways to address debt.
Find debt consultants in Canada who help manage other people’s debts. DebtHelpers.ca offer a range of consulting services and debt solutions designed to help clients reach their goal of becoming debt-free. Debt Helpers knows that there is no one-size-fits-all solution when it comes to debt, as people have different financial and life situations, necessitating customized solutions. Book a consultation today!