Canadian Finance Blog

5 Common Mistakes People Make When Trying To Get Out Of Debt

Posted: 24 Feb 2011 02:00 AM PST

Are you trying to get out of debt but having trouble paying down your credit card bills? If so, then there’s a good chance you are making some simple mistakes with your debt repayment strategy. Unfortunately credit cards don’t come with instructions, and barely explain how easy it is to build up a large balance. But if you go about it the right way, and you can avoid these common mistakes, then you have a real good chance of becoming debt free.

1-Don’t write down their goal

Big mistake! One of the most important things you can do when trying to reach a goal is to write it down on a piece of paper. So go grab a pen, or fire up your computer, and write down exactly it is what you want to achieve. It might sound silly – if you know your goal, why do you need to write it down? Well, writing it down makes it seem more real. Rather than just having a goal in your mind (that you can easily forget) by writing it down it takes on more meaning. Also, once it is written down you can put it in a place where you will see it often, and remind yourself that you are committed to reaching it. And while you are at it, put a deadline for reaching your goal – for example, “I will get completely out of debt by December 31 2012″. And write down the steps it will take to get there. The more specific you can be, the more likely you’ll reach your goal. Something like “I will pay off my fist credit card on July 2011, then pay off the second one by November 1 2011…” Try it. It works.

2-Don’t put away their credit cards

Shame on you if you are trying to get out of debt, and you don’t get rid of your credit cards! There’s no way you can pay off your debt if you can still buy that nice shirt or dress that’s on sale with your Visa card. You don’t have to cut them up or destroy them – simply lock them up in a safe deposit box, or put them in a sealed envelope somewhere safe – and somewhere that you won’t see them all the time. OK, you can keep one in your wallet or purse in case of emergency. But ONLY for emergencies!

3-Don’t change their spending habits

This mistake should be SO obvious that everyone should avoid making it. But it’s not. For some reason, there are people who just don’t realize that they can’t keep spending money AND get out of debt at the same time. And I’m not just talking about buying store brand bread and cereal. If your debt is out of control, then you need to make some serious changes in the way you spend money – like getting rid of cable TV for a few months (or at least getting rid of the high-priced premium channels). Or turning off your cell phones (or at least getting rid of the expensive data plans or changing to a lower priced plan). Or selling your expensive sports car or SUV and buying a low priced used car. “But I can’t live without cable TV or my cell phone, and I need that shiny new car to get to work” some people will say. Then be prepared for a long, costly battle with credit debt, my friend.

4-Don’t realize it will take time

Unless you’ve been doomed by some financial disaster, chances are it took you quite a while to get into debt. And unless you are fortunate enough to inherit a bunch of money or win the lottery, chances are it will take you quite a while to get out. I wish I could tell you there was some “secret” way to pay off your debt in just a few months. Or that there was some type of free government grant to help you get out of debt without paying it all back. But there are no secrets. And no free grants. But there are good companies that can help you lower your interest rates and your monthly payments, so more money goes towards your balance. Go find a good debt relief company and follow their plan. Before long, you’ll be on the road to being free from debt.

5-Don’t realize credit card companies won’t offer much help

In a perfect world, the credit card companies would lower our interest rates to under 10%, allow us to defer payments for as long as we want, and only allow us to charge as much as we can afford – and if you think any of this will ever happen, WAKE UP! Sure, it’s nice to dream. But that’s all it is. And all it will ever be. After all, who runs the credit cards? Banks. And why are banks in existence? To make money. So as long as people like you and I keep using credit cards, and keep making payments on large balances with high interest rates, then they’ll keep making money. So, this all leads to one simple question – why in the world would the help us when they make oodles and oodles of money from customers who can’t manage their finances? It’s in their best interest to keep us paying. Which, of course, does not make them evil in any way. But we as consumers need to understand this. And need to understand why we need to manage our debt on our own.

So there you have it. If you’re making any of these 5 mistakes, chances are good you’re having trouble paying off your credit card debts. While these lessons are sometimes hard to hear, by learning them well you’ll be that much closer to gaining control of your own finances. Go ahead and grab that piece of paper and pencil, write down your goals for getting out of debt, and get started on the road to life without debt!

Author Bio: This article was written by Kris Bickell from www.Debt-Tips.com, where you’ll find lot of helpful tips for getting out of debt and fixing your credit problems.

5 Common Mistakes People Make When Trying To Get Out Of Debt originally appeared on Canadian Finance Blog on February 24, 2011.