When you are drowning in debt, it can be easy to start to feel overwhelmed. At that point, you may begin to get desperate as you look for a way to get out of debt and rebuild your financial future. But if recovering from your debt is your goal, these are the seven top mistakes that you should avoid.
Continue To Charge Items Onto Your Credit Card
If you are drowning in debt, you may feel as though you are constantly struggling to have enough money to survive. It is very tempting to continue to make charges on your credit card, but your goal should be to eliminate your credit card debt. If you’re trying to pay off credit card debt while continuing to make charges, you will be working against your own goals.
Splurge on Non-Essential Items
One of the essential first steps to take when you are drowning in debt is to consider what essentials you must continue to make room for in your budget. While everyone’s needs may be unique, the four must-have needs typically include:
- Vehicle or transportation
- Utility bills
Some of these essentials may change. Your rent may include your utility bills, and you may have government assistance for food bills. Carefully consider which of the essentials apply to you as the first step to making a budget.
Obtain New Credit Cards
It can be tempting to open a new credit card to have extra money available to you whenever you are drowning in debt. However, one of the first questions you should ask yourself before opening up a new credit card is: are you sticking to a budget?
If you are not able to stick to a budget with the current amount of credit cards and loans that you already have, chances are good that you will only increase your debt if you open a new line of credit. A new credit inquiry will also negatively impact your credit score.
Continue To Make Investments
Although investing is generally seen as a smart financial move, there can be times when that is not the case. If you are struggling to keep ahead of your debt, you should instead focus on getting your current bills under control and paying down debt. Pause your investments so that any extra cash flow that you receive can instead be used to make payments towards lowering your debt.
Pay Minimum Amounts on Your Credit Card Bills
If you are attempting to pay off your debts, paying only the minimum amount due on your credit cards can result in higher debt. If you continue to make the minimum payment amount on your credit card bills, you will also end up having to take longer to pay them off, which will make it harder for you to get back on your feet financially.
Immediately Accept the Help of a Debt Relief Company
Although some debt relief companies may be legitimate, other companies will end up charging you a monthly fee without actually helping you. This can actually increase your debt instead of reducing it. Before you decide to use the services of a debt relief company, make sure you thoroughly research them.
Choose Bankruptcy Without an Attorney
If your debt becomes so overwhelming that you think you need to file bankruptcy, talk to a bankruptcy attorney first. A qualified and experienced attorney can help you decide if your debt will be discharged during a bankruptcy. A bankruptcy attorney can also help you decide which type of bankruptcy is right for you.