You want to eliminate your debts and you do well keeping on track most of the time but no matter how hard you try, you sometimes fall back into the same old cycle of running out of money by payday? You could be doing lots of things right like keeping track of your spending, avoiding using your credit cards, never missing a loan payment but your overall debt doesn’t seem to be coming down as fast as you would like. Here are some ways you might be sabotaging your own debt reduction plans.
It’s all about budgeting
Being able to pay off your debts is more than just creating a budget. That’s like saying you can successfully lose weight just by going on a diet. Many budgets fail for the same reasons as most diets fail. Perhaps you see following a budget as a temporary quick fix rather than a lifestyle change. I’ll cut back for a couple of months and catch up on my payments. The problem with this approach is, unless you look at debt management as a life long requirement you may reduce your debt for a while but all too quickly, just like the pounds, the debt piles back on. Proper debt management is about setting specific goals, creating a realistic budget that meets those goals and developing long term money management skills that make achieving those goals second nature.
If I could just stop spending
Putting yourself on a strict no-spending policy might seem like a good solution to your debt problems but this is usually a recipe for failure. Much like ‘fad’ diets, if you put yourself on a severe spending restriction you are likely to feel deprived and resentful. This more often than not leads to blowout spending sprees that you regret later and destroys your debt reduction plans. The better approach is to develop a balanced spending plan that covers your necessities and debt reduction but allows some room for enjoyment as well.
You’re focused on how much debt you have
Okay, this one might seem like an odd item to put on a list of how you are preventing yourself from achieving your debt reduction goals. After all, isn’t the final objective to eliminate your debt? Don’t we always say the starting point is knowing how much you owe and to who? Yes but you can’t allow the amount of your debts to overwhelm you. You need to forget about past money mistakes and move forward. Set a series of small, attainable goals that, in succession, will eventually lead to successful debt reduction. That may mean paying off one creditor at a time until they are all paid off in full. It might mean booking an appointment with a debt counsellor to get some advice about your options. Never mind how big the challenge, take it one step at a time.
If I could just earn a little more
Trying to earn some extra income to reduce your debt is a strategy that can help you pay off your debt, but if you are relying on bonuses or overtime as your sole source of cash to reduce your debt, you probably won’t meet your goals. It’s always a better idea to balance your budget based on your lowest expected earning potential. Anything you earn above that should be applied directly to debt reduction but shouldn’t be counted on.
Debt reduction is a journey as said very well by a client of one of our advisors:
For those out there who are struggling, hang tough – dig in your heels and stay focused – the immense relief is worth the effort.
What words of encouragement can you give our readers to help them meet their debt reduction goals?