Be Aware of These Mistakes
- Not having a strategy. Some people prefer paying off the smallest balances first so they can cross one debt off their list and feel that sense of accomplishment. Others prefer to tackle the debt with the highest interest rate first so they save more money in the long run. Doesn't matter which route you take - just pick a strategy and stick with it. Once one debt is paid down, take that payment amount and direct it toward the next in line to speed up your debt repayment so you can enjoy your success even faster.
- Not having a target date. You can set a target date for complete repayment of your debts, but it’s also a good idea to set some intermittent goals so you can track your progress. If you miss a date, don’t get discouraged; figure out why and use that information to set new, more realistic goals.
- Not having an emergency account. It may seem counter intuitive not to put every “extra” cent into paying down debt, but if you don’t have any savings and an unexpected expense like a car repair or medical bill pops up, you’ll find yourself reaching for the plastic all over again. Set aside a small amount each month to a dedicated emergency fund. To make it as simple as possible, open a savings account and set up automatic deposits from your paycheck or an automatic transfer from your checking account.
- Not treating yourself. Having an emergency fund is one way to stop taking on new debt, but you can also avoid buying “treats” for yourself by planning a little “fun money” into your budget - and paying yourself first every paycheck. Again, the idea of diverting money from debt repayment may not seem financially sound, but by having a little money to spend on treats and extras, you avoid feeling deprived so it’s easier to stay on track and avoid taking on new debt.
- Not understanding your spending triggers and how to avoid them. Personal finance doesn’t get as much attention in schools as it should; after all, we need to know how to manage money throughout our entire lives. Plus, there are plenty of psychological triggers tied up in spending money - stress is a big one. Think about what it is that makes you want to spend money beyond your means, then try to find ways to circumvent or redirect those urges. Physical activity like walking is a great, low-cost way to manage stress and so is charity work. Then, spend some time educating yourself about personal finance with our financial education tools.
Paying back debt isn't easy, but it's definitely doable. Be proud of yourself for your fiscal responsibility and celebrate your successes along the way, no matter how small. Before you know it, you'll be debt free and in a much better position financially. If you still need help with your financial plan, don't hesitate to contact us, one of our Member Financial Representatives will be happy to assist you.