We aren’t born knowing how to balance our books and manage our money. Money management is a learned skill that can often take trial and error before we become the masters of our finances. However, the ‘error’ part of trial and error can often be more prominent. Many people find themselves in severe financial strife by making these common debt management mistakes:
Not Reaching Out to Experts for Help
Getting into severe debt with no apparent way out can be overwhelming. It can be even more stressful if you don’t have excellent financial skills. Don’t be afraid to contact budget advisors and even a Fort Lauderdale bankruptcy lawyer if you don’t see a way out. They can be the fresh set of eyes you need to formulate a financial plan and help you decide if bankruptcy is your best option.
Ignoring Your Debt
Managing debt can be so overwhelming that some people prefer not to give it any thought. Action letters can go unopened, and debt collector phone calls go unanswered. However, ignoring your financial obligations doesn’t eliminate your debt. Instead, it can make it more urgent.
Ignoring debt can result in credit score damage, high interest rates, penalties, and late fees. Even if you can’t afford to make minimum payments to creditors, make your situation known. Many creditors are happy to negotiate easier repayment terms until you find your financial footing again.
Taking On More Debt
Obtaining more money when you lack it can make sense in your head, but it’s not a wise decision when it involves borrowing more money from financial institutions. The more debt you take on, the more you have to pay off. It can become a vicious cycle that is hard to get out of. When you’re already struggling to pay off loans and credit card debts, refrain from taking out new ones. Instead, focus on spending less, earning more, and paying down your debts.
Making Minimum Payments
Making minimum payments on debts keeps creditors at bay. However, you often make very little progress in paying down the loan principal. Put more money on high-interest loans where possible and pay them off the fastest. You can then turn your attention to the lower-interest loans next. This approach might also see you exploring debt consolidation. Well-executed debt consolidation can see you merging multiple loans into one larger, easier-to-manage debt with a singular interest rate.
Spending More Than You Earn
Having outgoings that exceed income is a trap many people fall into when they lack budgeting knowledge. You might take on loans to buy things you want and need and only find out too late that your repayments see you living beyond your means.
Fortunately, you can fix this common debt management mistake with time, patience, and hard work. Start by writing down all your outgoings and compare them to your income. You can then look at ways to reduce your monthly spending and redirect spare funds to pay down your debt.
No one is above making financial mistakes, but some can be more severe than others. If you have made these common debt management mistakes above, now might be the right time to seek financial and legal help to explore your resolution options.
