When you are first ditching your debt – Mistakes will be made!
At the start of every journey is the first step, like the decision to become debt free, you no longer want to be a slave to your debts, you want financial freedom and some savings in the bank!
Now like any great journey it is going to take commitment, deliberate planning and a few savvy decisions, the important thing to remember is paying of debt takes time and is not going to happen overnight.
Having been on this journey myself I must admit I made a couple of mistakes, learn from my mistakes by avoiding these four things:
Ditching your Debt – Thinking you can go it Alone.
There is so much support and information (a lot of it free) from friends, family, professional advisers, financial counsellors, and looking back I would even consider doing a financial course.
Creating a budget was easy, however listing the debt was extremely overwhelming and I wasn’t sure where or how to start making the budget work.
After trying to do it by myself I eventually sought help, don’t hesitate to ask for help it makes a world of difference.
Not Ditching the Spending Habits
Old habits are hard to change, they are like a well-worn pair of jeans, they’re comfortable, we’re used to them, we wear them repeatedly.
However there comes a time when we just have to get rid of the jeans, and bad spending habits are the same, if you want to be debt free you are going to have to let go of those old ways of spending.
This is not to say you have to stop spending and become a recluse, it means making better choices, each time you buy takeaways or buy that new pair of jeans on sale, consider if it is a want or a need.
Ditching your Debt with No budget
As far as what you will need for your debt free journey there is nothing more important than a budget, without creating a budget you will find it nearly impossible to gain control of your finances.
To most people the thought of spending hours making a budget sees them giving up before they even start, and to be fair is it a bit confronting, especially in the age of tap n’ pay, however it a very simple process.
Using bank statements, credit statements, credit reports, you will start but writing/typing your income, listing your fixed expense such as rent, utility bills, car payments etc.
From this initial process you will be able to work out what you have left at the end of your pay cycle.
All or Nothing Approach
This is not an approach I would recommend, trying to pay all your debts off at once can leave you feeling exhausted and resentful and sadly could see you quitting, this will also leave you with no money for emergencies or any kind of life.
Instead, when you have numerous debts, you should prioritize them in order of highest-interest to lowest-interest, I would suggest with small debts try paying those off in full (up to about $500 is considered a small debt).
Start paying down the highest-interest first as this is costing you more, as you pay them off go down the list – remember you do still have to make the minimum payments on the other debts in the list.
If you are able to apply for a debt consolidation loan, this is often a good idea if you are able to get approval this will mean only paying one payment for your debts and is a less stressful approach.
Don’t let don’t weigh you down, take the first step in your journey to ditching your debt!