If you’ve decided to improve your debt management skills and want to take the first steps to eliminating debt, there’s always some room for improvement. It's never too late to learn from your mistakes and avoid them going forward. Better yet, you can learn from others' mistakes and avoid making them altogether. Here are a few debt management mistakes people make and solutions to get back on track.
The mistake: Only making the minimum payment on your credit cards.
As of 2017, Americans have accumulated around $1 trillion in credit card debt. That means that people have spent over a trillion dollars more than they actually have. The average household owes almost $16,000 in credit card debt. While having a credit card may be a necessity for some, trying to pay down your debt while only making the minimum payment is an exercise in futility. With interest rates, you will only lengthen the amount of time it takes to get rid of your debt.
The solution: Pay as much as you can each month.
Debt management is not an easy undertaking, but it will be well worth the rewards of less stress and more financial stability. Increasing your monthly payments as much as possible might help you actually pay less in the long run. Credit cards typically come with high interest rates, so focus your efforts there.
The mistake: Hiding from your creditors.
Denial can be a big factor in debt mismanagement. Challenging life circumstances and stress can make you want to go into hiding once the bills start coming in, but your debt won’t simply go away.
The solution: Be proactive and call your creditors.
It is perfectly acceptable to contact your creditor and tell them that you are having trouble making payments. They may be able to lower your minimum payment or interest rate for a set amount of time. They may even allow you to skip a few payments to help you get back on track. If you have a good track record of paying on time, you might be surprised to find out just how accommodating your creditors can be.
The mistake: Making a late payment.
Missing a deadline on a bill can come with a whole host of consequences that can lead to additional financial strain. Late payments usually come with a late fee and you might find that your interest rate increases. Late payments may also hurt your credit score. This will make it harder to secure loans and mean that you end up paying higher interest rates for years to come.
The solution: Contact your creditors.
Once again, simply contacting your creditors will allow you to make different arrangements and keep your debt management strategies intact. Something as simple as changing your due date to later in the month could be enough to help you achieve better balance and avoid late payments.
When it comes to perfecting debt management and achieving financial security, it is often easier said than done. Following through on the necessary steps can prove challenging, but it is important that you take the time to educate yourself about different available options and resources. Don't be afraid to communicate with your creditors and ask for help. They want you to succeed and may be able to offer valuable help and relief.
Please use your discretion before making any decisions based on the information provided. This article is not intended to be a substitute for seeking professional advice based on your individual needs.