The road to financial freedom can be a long and difficult one when you have debts to contend with. However, being debt-free is more than worth it. If you are struggling to get out of debt, it could be because you are making one of these critical mistakes.
Not setting aside emergency savings
It can be very tempting to use all of your spare cash to pay off your debts.
But if you don’t keep an emergency fund, you could find yourself getting in even more trouble if your car breaks down or you are made redundant. It’s a good idea to set aside at least five percent of your income as an emergency fund until you have at least three months worth of expenses covered.
Not creating a budget
It is important to sit down and work out a budget. How much money do you have coming in every month?
How much money is going out? How much money are you going to give yourself for weekly expenses? There are some great budget apps that can help you with this.
Closing accounts once they are paid off
Your credit score is based on a number of different factors. This includes how much of your credit you have available and the average age of your credit accounts. If you close an account, both of these factors will lower, which can damage your score even further.
Leaving yourself vulnerable
It can be easy to feel like you should just put probate, estates, and trust litigation issues off until your debts are dealt with.
However, the worst thing you can do is leave yourself vulnerable to problems with your estate because you have not sorted out a will or you have not taken the correct legal advice.
Yes, you need to make a dedicated effort to pay your debt off every month, but you also need to make sure you don’t bury your head in the sand when it comes to other issues.
Trying to pay off multiple debts at once
Do you have debts coming from numerous sources?
If so, trying to address each one every month is a bad move. Instead, deal with the debt with the highest interest rate first, and then move down to the card with the next highest interest rate until all of your debt is gone.
Needless to say, you should make your minimum payment on all debts every month.
Trying to get out of debt alone
Trying to get out of debt alone can feel like you have the weight of the world on your shoulders, and it can have a negative impact on your health.
Take advantage of the help that is available. If you don’t want to ask your friends or relatives, call a non-profit credit agency and get free help from professionals.
Do any of the errors above sound familiar? If so, take note of the advice that has been provided, and you will be a few steps closer to financial freedom.