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You’ve just sent a payment towards your debt.
You feel GREAT…
Until you realize… you still have so far to go!
Being in debt is debilitating. It feels like the end is nowhere in sight and you’re just constantly trying to stay afloat.
But, what if I told you that sometimes WE are the ones who make our situation worse?
We can blame the soulless corporate banks or the conniving student loan companies, but the truth is: we are ALSO keeping ourselves in debt, indefinitely.
So are you ready to change this and get yourself closer towards financial freedom?
Here are 13 mistakes that are keeping you in debt.
13 Debt Mistakes You’re Probably Making
1. NOT creating a budget.
Budgeting isn’t sexy, I get it. I can see your eyes rolling and hear that long, exasperated sigh…
But there’s no getting around the fact that getting out of debt is made more difficult if you don’t have a plan.
An effective budget IS that plan.
Budgeting helps you determine where your money goes and how to best utilize it. It ensures you:
- have no issues covering non-negotiable expenses (housing, utilities, etc.)
- put savings aside for emergencies
- start investing for retirement
- and most importantly get out of debt!
Now, not all budgets are created equal and not all budgeting styles work for everyone.
I personally despise overly complicated budgets that have me tracking 50 different spending categories. It’s far too tedious and distracts me from the bigger picture—to save money, PERIOD!
Instead of tracking every penny I spend across a gazillion categories, I subtract fixed monthly expenses (non-negotiables like rent, utilities, car payments, etc.) from my income and determine my monthly spending allowance.
Then, after tracking my spending I’m able to find ways to cut back and put more money towards debt! (when I had it)
For a detailed look at my budgeting method, read my 11 simple steps to create a fail-proof budget!
Related Read: Gross Pay vs Net Pay – How to Budget the RIGHT Way
2. NOT living frugally.
Frugal living is all the rage, and for a reason! And some people are even going the extremely frugal route.
But living frugally doesn’t mean you have to live like a monk. No offense monks…
Frugal living is about recalibrating your relationship with money and things. It’s about recognizing the difference between wants and needs, as well as reducing your reliance on things to make you happy.
Basically, frugal living and minimalism go hand in hand. You’re cutting back on expenses AND minimizing what you own.
If you aren’t living frugally, then you’re spending needlessly and not putting enough money towards debt.
And frugal living doesn’t have to be difficult! There are so many simple ways to save money every day and ultimately help you become debt-free.
Take a look at my 75 frugal living tips to start saving money NOW!
You can also get a super convenient cheat sheet downloaded straight to your phone, so that no matter where you are you’re equipped with frugal living strategies.
3. NOT finding creative ways to save money.
Guys, the internet and technology are amazing, in case you weren’t aware.
There are so many ways to save money on your everyday purchases these days—it’s unbelievable!
And if you aren’t taking advantage of these apps/services, then you’re making a huge mistake. You aren’t saving and therefore aren’t putting more money towards debt.
- Rakuten — Offers cash back and discounts at some of your favorite online retailers. When you’re browsing, it’ll alert you of savings opportunities and promos! Get a $10 BONUS for signing up!
- Ibotta — Whether you’re shopping online or in-store, Ibotta has you covered. You can link store loyalty cards and get cash back in 24 hours or scan receipts. Get a $20 WELCOME BONUS!
Related Read: 11 Hacks to Get FREE Starbucks Drinks
4. NOT communicating and devising a plan with a friend/partner.
Talking about money isn’t easy for everyone, especially when you’re facing significant student loan, mortgage, or credit card debt.
But, if you’re in a relationship, it’s important that you discuss these things with your partner.
According to CNBC, 43% of Americans are not telling their partners about their credit card debt.
Not only does this put an enormous strain on your relationship (money is consistently one of the most common reasons for divorce), but it also makes it more difficult to achieve your financial goals.
Being open and honest with your partner about your financial situation means they can give you the support you need to stay within your budget, pay off debt, and get yourself back on track.
And for the single people out there, you’re keeping yourself in debt by trying to do this alone!
Find a friend who also has clear financial goals. Maybe they want to get out of debt as well or save for retirement, etc.
Be the support you both need to stay focused and moving forward. Keep each other honest by checking in regularly and giving each other some tough-love when you temporarily veer off the path.
Related Read: How to Live Frugally on ONE Income
5. Blowing your monthly spending allowance on eating-out and hobbies.
Alright, so maybe you only go to dinner with friends once a week, but do you watch what you spend? Did you opt for that second bottle of wine last night when maaaaaybe one would’ve been fine?
Or, maybe you’re a video-game enthusiast…Did you go absolutely nuts on the recent Nintendo eShop sale and buy way too many games for your Switch?
We’ve all been there…
But getting out of debt means you have to make some sacrifices. They don’t have to be huge sacrifices, but you’ll need to put your monthly spending allowance to good use.
Eat-out less and cook at home more. Buy 1 game and play it to death before getting another one. Limit yourself to buying 2 books at the bookstore instead of a month’s supply that you may not get around to reading.
After you’ve paid for fixed expenses, your monthly spending allowance needs to be conserved and used to get out of debt.
Find simple, small ways to save on dining-out and hobbies without depriving yourself completely.
Related Read: How to Save Money on Hobbies (Without Giving Them Up!)
6. NOT having a Rainy-Day and Emergency Fund.
Getting out of debt is difficult enough without the lovely (sarcasm), unexpected expenses of just life.
If you don’t have a rainy-day fund set aside for surprise car repairs or an emergency fund to cover you in the event of unemployment…then you’re setting yourself up to go further into debt.
Before you seriously start tackling debt, you need to be prepared for all eventualities and have money saved.
Otherwise, when the refrigerator breaks or your iPhone falls in the toilet, you’ll end up charging these things on credit cards.
Find out more about rainy-day funds and emergency funds and WHY YOU NEED THEM.
7. NOT having a pay-off strategy.
Maybe you’re a Debt Snowball person, or a Debt Avalanche kinda gal…but whichever you prefer, you need to have a strategy to pay off debt!
And if you’re not familiar with the 2 popular debt pay-off methods, that’s okay! I’m here to help.
Debt Snowball is where you list all of your debt, from smallest to largest amounts. Then, you pay off the smallest loan amount first with the extra money you have. You pay each debt off smallest to largest, so that you build momentum like a snowball!
Debt Avalanche is the method that has you list all of your debt, but instead by highest to lowest interest rate. Then, extra money is put towards higher-interest debt first before tackling the lower-interest debt. This method saves you the MOST money because you’re paying less in interest over time.
I’m personally an Avalanche gal because I hate giving mega-banks more money. But the Snowball method can be advantageous because getting rid of smaller loans can help you stay motivated and feel like you’re making more progress.
I’ve used the Avalanche method to pay off $55k in student loans, but for example, my sister paid off her student loan debt using the Debt Snowball and loved it!
Whichever sounds best to you, do it. You have to have a clear strategy to get out of debt once and for all!
8. Deferring your student loans.
For the love of money, don’t do it!
Deferment is when you stop paying back your loans and put them off until a later date. This options should ONLY be used if you’re unemployed or experiencing extreme financial difficulties.
For most of us though, deferment is a terrible option.
When you defer a loan, it is still accruing interest. This interest is also being capitalized!
What this means is that once deferment ends, the interest accrued this entire time is added to your principal balance or loan amount. This is called capitalization or capitalized interest.
In other words, you’ll pay interest on interest!
By deferring your student loans, you’re losing A TON of money. It may not feel like it right now, but future you will hate you for it.
9. NOT researching student loan refinancing options.
Nowadays, refinancing your loans is easier than ever.
So why are you waiting and losing a ton of money in interest?!
Before you get started, you need to determine what types of loans and what loan amounts you have. Some are private, offered through companies like Citibank, Discover, Sallie Mae, etc. Others will be federal loans offered by the federal government.
Write down all of your loan information in one place.
Now that you have this information, let’s talk about options to refinance each.
For federal loans, the federal government does not offer students a way to refinance them (grrr…). What they do offer is consolidation of your federal loans.
Consolidating basically means your loans are merged together so that you make ONE monthly payment instead of one for EACH loan.
This isn’t as good as refinancing because you still pay high interest rates, but it will help you tackle your debt more easily. You’ll receive one monthly bill instead of multiple from your various federal loan companies. And who wants more bills??
Private loans, on the other hand, CAN be refinanced and nowadays there are MANY companies that can help you do this.
Compare refinancing options using:
I cannot speak highly enough about Credible. They are one of the leading student loan refinancing companies and I highly recommend them.
Using Credible, you can easily compare lenders and interest rates so that you get the best rate possible. Doing so, can save you a lot of money (understatement of the year…).
They have an incredibly user friendly website and you can prequalify today.
Better yet, it’s completely free to apply!
10. STILL using your credit cards.
When you’re trying to get out of debt, you need to ditch the credit cards guys.
Unless you’re using credit cards for basic expenses like gas and food and paying it off every month, then all you’re doing is going further into debt.
If you’re taking your credit cards with you to your favorite clothing store, or have it stored on your Amazon account…then you’re just asking for trouble.
Be mindful of your purchases by adopting frugal living strategies. Only purchase what is necessary and what you can pay for immediately, not next paycheck.
And if credit card debt is what you’re trying to pay off…then this should be a no-brainer.
So leave the credit cards at home!
11. NOT utilizing balance transfer offers.
If you’re tackling credit card debt, don’t lose out on some potentially excellent balance transfer offers!
Why continue paying 19+% APR on your credit card debt when you could transfer it to another card and pay 0% for 12 months?
With balance transfers, you’re just moving debt around but you’re saving yourself money in interest charges and that can make a huge difference.
Login to your credit card accounts and see what offers they currently have. You may be able to save yourself money and give yourself more time to pay it off as well!
12. NOT upping your side-hustle game.
If you’re only working 40 hours per week, sadly you’re doing it wrong.
You need to start using your spare time to boost your income and pay down debt.
But side-hustles don’t have to consume ALL of your free time. I see you introverts out there anxiously clutching your knitting needles, game controllers, and books!
The great news is that side-hustles can incorporate your hobbies!
Are you into home decor? Repurpose furniture and make a killing!
Love all things knitted? Sell knitting patterns or knitted items online!
Love the written word? Start a proofreading side-hustle and boost your income!
There are so many side-hustles you can start from the comfort of your home! You can earn an extra $100-$2000+/month:
Honestly, the possibilities are endless. What matters is that you explore ways to boost your income and find the methods that you enjoy most.
Here are some more side-hustle ideas to start boosting your income TODAY!
Take online surveys and earn some extra cash:
- Swagbucks – All you do is take online surveys, watch videos or movie trailers, and earn points. Then, redeem those points for gift cards and Paypal money! Get a $10 bonus for signing up.
- Survey Junkie – Survey Junkie works with big-name companies to do market research. It’s simple: you answer some questions, and get cash. So start monetizing your downtime with Survey Junkie today!
- Inbox Dollars – They offer a variety of ways to earn Paypal cash and gift cards. Take surveys, watch videos, play games, even read emails and earn! Get a $5 bonus when you sign up.
REALLY boost your side-hustle money by learning new skills:
- Learn how to make money with niche websites in my step-by-step guide for beginners.
- Take the Facebook Ads Side-Hustle Course and learn everything you need to know about launching your own freelance business.
- Learn how to turn proofreading into a money-making side hustle or 6 figure business with Proofread Anywhere.
Related Read: How to Start a Money-Making Niche Blog
13. NOT seeking promotions or pay increases.
There’s a new position open at your company. What do you do?
Read the email, realize you’re totally qualified, but don’t apply because “they’ll probably give it to someone else anyway.”
It’s time for your annual pay increase. What do you do?
“Eh, whatever. They’ll give me whatever they decide to give me.”
We fall into these mind traps all the time. And for the introverts out there, on average you make less money than extroverts.
Not seeking promotions or pay raises is a huge mistake that keeps all of us lower on the corporate ladder and as a result—in debt.
But we can change this.
We all need to acknowledge the skills and abilities we possess that others may not. We must make our voices heard in the workplace so that we’re seen as an asset to any team.
And most importantly, we need to embrace our strengths and enter confidently into job interviews and annual pay increase negotiations knowing that we can do this.
Debt doesn’t have to define us. You too can be free of it.
If you create a budget that works for you, choose a pay-off strategy, and be proactive, then financial freedom IS possible. Avoid these common debt mistakes and start facing your debt head-on by smart saving and money management.
And download my 75 EASY Frugal Living Tips Cheat Sheet . You’ll ALWAYS have frugal strategies close to hand, so you can finally be out of debt for good!