6 Reasons You Are Still in Debt

6-Reasons-you-are-still-in-debtAre you still in debt and wondering why? Chances are, you have one of these six habits or mindsets, preventing you from getting out of debt. The first part of changing anything is to change your mind and your habits. Examine these six items, see if they apply to you, and see how you can fix them.

1. You are not budgeting. Sit down and create a household budget. The easiest way to save money is to assign money to all of your needs. Once you begin saving money, you can pay down debt. Having a budget also means that you do not end up spending more than you can pay off each month on your credit cards.

2. You are making minimum payments. When you make the budget, you can also pick a bill to stop making minimum payments to. Any amount you pay over the minimum will chip down that debt. If you’re nervous about overpaying because you are afraid that you will not have enough money, start small. Pay $5 over on the first month, $10 over the next month, and $20 over the next month, doubling each time until you reach an overpayment amount that sees you chipping down the balance and keeping your budget balanced. Once you have the first bill paid off, move on to overpaying the next one.

Also Read: Top 10 Habits of Frugal People

Note: Watch out for pre-payment penalties. Some installment loans like mortgages or auto-loans may have them snuck into the contract. If yours has one save those bills for last. Get the rest of your debt paid down, give yourself about 3 – 6 months showing good, balance free credit, and refinance them into something that is 1. lower, and 2. without the penalties.

3. You are relying on credit for big projects or emergencies and not your savings. Stop doing that. Budget and set aside money to cover emergencies and major projects or purchases that you know will have to make.

4. You see credit as income. Credit is not income and it is not extra money that you can spend. Close your credit cards if you think it is. You do more damage to your credit by building up high balances than you do by closing an account. Keep only 1 or 2 credit cards open. Use them for the expenses that you will pay off every month in full, things you pay for out of pocket anyway. If an emergency happens that you simply have to go to the credit card because not enough is saved, have a budget plan you can shift to that will allow you to pay down that balance quickly.

Also Read: 3 Secrets to Stop Living Paycheck to Paycheck

5. You think debt just happens. Just because others are in debt does not mean that you have to be. Budget and buy according to your needs, not what others are doing. Debt does not “just happen.” Debt happens when we allow it to or make a conscious choice to go into debt.

6. You are entitled to the things you buy. You’re not entitled to the best car, television, house, or computer. Spend based on what you can actually afford and still save, not based on what others in your “bracket” or your peers and co-workers buy. When you try to play the “keeping up with the Joneses” game, you only put yourself into needless debt.

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