The Worst Ways To Deal With Debt (And What You Should Try Instead)
Debt is nothing unusual. It’s actually pretty much just a fact of life for many people; part of their overall financial management picture. It might not be the prettiest of pictures, but debt always has a role to play in personal finance.
The problem most of us have with debt is that it’s not something we like to think about. We know it’s there, but few of us are good at facing up to the problem and doing something proactive to fix it. Below, let’s discuss common strategies that people use for coping with debt — and the wiser financial decisions you should be making instead.
1. Ignoring It
Pretending that debt doesn’t exist, making minimum payments without even checking your balance — we’ve all done it, but the simple truth is that it’s potentially damaging. Confronting your debts is never easy, but if you have any of the signs listed on thebalance.com, it’s clear your debt is no longer sustainable. It needs to be confronted head-on.
What You Should Do Instead: Get the full facts and figures of where you stand and then make plans to tackle each individual debt. It might be a bracing experience, but you will be better off in the long run for it.
2. Cutting Your Budget To The Bone
If you’re in debt, the idea of cutting your monthly budget sounds like a sensible one, ensuring that you can make bigger debt repayments as a result. While this is a sound idea, it’s dangerous if you cut too far. The more deprived you feel from usual life activities, the more likely it is that on one bad day, you have a spending splurge to make up for the feeling of constantly missing out.
What You Should Do Instead: If you are struggling to make minimum payments, then reducing your budget can be damaging as well as nigh-on impossible to live by. Instead, you might be better off having a browse of consolidatingdebt.co to see if grouping your disparate payments into one lump sum might be beneficial for you.
3. Constantly Moving To New 0% Deals
On some levels, constantly switching your debts to 0% deals sounds like a decent enough strategy. It’s a strategy that ensures that you’re not paying any interest, saving you money in the long term.
However, this strategy becomes problematic if you find yourself never actually paying off the debts you keep moving around. One day, you will run out of 0% deals to move to, and then you could find yourself in a financial knot.
What You Should Do Instead: Try a tactic called snowballing; pay off the debt that is costing you the most money and just service the rest with minimum payments. When the first debt is cleared, move onto the next most expensive debt, and so on and so forth. This ensures you’re actually paying debts off rather than just moving them around, as well as guaranteeing you’re not paying too much in terms of interest.
By making small changes to the ways that you cope with debt, a future in which you are financially free could be more attainable than you think.
