If money is power, then what does that make debt? And with credit cards and digital wallets that let us purchase anything and everything with the click of a button, it’s never been easier to slip into debt. Before you even realize it, you can be in serious financial trouble. In order to take charge of your debt before it gets even more out of control, here are common money mistakes most people don’t even know they are making — and what you should do about it.
Problem: When trying to budget, focusing on those little, everyday purchases.
Instead: Look at your larger, less visible expenses.
Sure, it is a great idea to save money by cutting back on small expenses such as getting a coffee everyday or ordering take out at your office instead of bringing a bagged lunch. Instead, you should take a closer look at your monthlyexpenses and see if you can whittle them down a little, or a lot. Your credit card bill, health insurance, subscriptions, and even car payments could be higher than you need to pay, so contact your provider and ask about any new plans that can potentially change your overall bill. Remember that shaving just a few dollars off a monthly charge will add up to larger savings in time.
Problem: Paying down the credit card that has the largest balance first.
Instead: Focus on the card that has the highest interest.
Interest is a pesky detail that many consumers tend to forget. The average American household is paying a total of $6,658 in interest every year, so make sure to cut down on your interest payments first before you pay off any other debts. If you need help understanding which debts to prioritize, then credit counseling is always a viable option, as is debt consolidation management.
Problem: Being too frugal.
Instead: Think and spend for the long term.
It is fantastic to have a budget and to stick to it. However, cutting corners can sometimes cost you more in the long run. For example, if you are thinking about buying a cheaper used car with a lot of miles, consider the higher risks of it breaking down. Or, instead of renting an apartment, consider purchasing a condo or a home to save on rent that gets you nothing.
At the end of the day, it is incredibly important for any consumer to take into account their spending habits and financial patterns. If you need help paying off your debt, consider credit counseling with The Debt Management Group. With our professional help, you will get back on track in no time.