Stupid things which can sink your head lower in the debt-sand

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By: tiarajoseph11
on 6th Oct,2015

Let’s find out the nasty habits which may lure us to fall into the debt trap.

If you have debt problems, it’s possible that you might be doing some silly financial mistakes. These mistakes are lowering your finances deeper in the dark. Once you are obsessed with these mistakes, unknowingly you might be going towards a riskier path that can take you all the way down to the misery. So, if you want to find out what kind of mistakes they actually are, read below:

1. Denying your real situation

This is wrong, I mean these type of people can hide their heads in the sand like an ostrich. Let’s assume you’re unable to pay your rent or electricity charges, and you’ve also decided to ignore your mailbox. So, you’re not receiving the bills anymore, but does it really solve your problem from the core? The answer is One day when you realize the true situation, everything will be deteriorated. You’ll find yourself into more complications. You might start getting collection calls and more of your services will be deactivated.

If you can understand the reality and accept your situation, you may avoid it easily. To get a solution from this situation, keep calm and face it in a planned way.

2. Assuming yourself a victim

The most common issues every debtor normally reveal is that they got victimized by the credit card company. They normally always blame that because of the credit card company, they’re now experiencing hardship.

It is true that sometimes few unavoidable circumstances and good offers compel the customers to use their cards unwisely. But if you’re using the cards regularly on purpose, you can't blame the company for charging you. Also, if you assume yourself as a victim, it‘ll be hard for you to focus on the next step. You should think about how to get rid of your debts. It’s not at all for the faint of hearts, do your hard work and you’ll be in a good shape.

3. Not identifying the issues which trigger the debts

Nobody knows about the main cause of falling into debt problems. We should think and dig up the basic issues which can lead us to debt. So, only following several tips will not be sufficient to drive your debts away. If you don't isolate the core reason of your issues, you can't make the required adjustments.

4. Your credit card debt isn't your priority

You can divide your debts into two distinct categories. They are: 1.good debts and 2.bad debts. A good debt originates from making an investment like a mortgage or a student loan, which can give a better return in the future. On the other hand, a bad debt is created by borrowing money for spending, which most of the time may not be essential.

Normally, credit card expenditure is under the bad debt category. It’s because when you purchase a commodity like a car, a freezer or a dish-washer, it’ll depreciate with time. It’ll not give you good returns in the future. But, your credit card company will charge you interest till you pay off the outstanding amount completely. So, the longer you wait to pay off credit card debt, the more your total debts will rise up.

5. Paying only minimum credit balances

Let's just assume a typical situation where a person has $20,000 debt on a single credit card, with an APR of 15%. The minimum monthly payment would be interest plus 1% of the balance. Here, the minimum payment for the first month is $450. If the minimum required payment is continued every month, it’ll take 3.75 years to pay off your debt completely. If you’ve sufficient money to pay a little more, take the most aggressive initiative possible to pay down your debt. It’ll be the easiest and safest option to repay debt.

6. Not asking for professional help

If you are experiencing too much hardship to manage your debts, then you’ve mainly two options that can ease up your difficulties. Those are the “Hardship Department” located in all credit card companies and a professional credit counseling agency.

Hardship departments help those who fall into debt due to a crisis like unemployment, an accident or critical illness. There are the programs which offer lower interest rate, reduce minimum payments and waive off extra charges.

7. Not planning for financial goals

It’s easy to stay within your budget and keep going on with your money. You must have something planned and defined that can be your aim. There should be something which can be the sole target for your future. It can change the way you manage your finances and also gives you a goal to achieve in future.

Your goal can be anything, becoming a business owner, to buy a property or buying a car. Just take out time and plan your goals, which will lead you and give you the motivation to get out of debt.

Read more: Mind tricks to help save money - Primary goal of managing finance

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