The road to financial freedom can be a long and difficult one when you have debt to contend with. However, being debt-free is more than worth it. If you are struggling to get out of debt, it could be because you are making one of these critical mistakes.
Not Setting Aside Emergency Savings
It can be very tempting to use all of your spare cash to pay off your debts. But if you don’t keep an emergency fund, you could find yourself getting in even more trouble if your car breaks down or you are made redundant. It’s a good idea to set aside at least five percent of your income as an emergency fund until you have at least three months worth of expenses covered.
Closing Accounts Once They Are Paid Off
Your credit score is based on a number of different factors. This includes how much of your credit you have available and the average age of your credit accounts. If you close an account, both of these factors will lower, which can damage your score even further.
Sacrificing Insurance to Pay off Debts
If you have found yourself in a position where you have debts to pay off, it is important to sit down and assess your finances. You need to look for ways to make savings so you can put this extra cash into paying off the money you owe.
Nevertheless, you do need to make sure you do not end up sacrificing the likes of insurance to save money per month. If you were to drive on the road without car insurance, for example, you could find yourself in a lot of trouble.
One thing you can do is look around online to see if there are better deals available to you. You may also want to carefully consider the next car you purchase, ensuring that it is one that is going to be cheap to insure.
Have your online research be very specific to your needs. You can search online for answers to your exact questions such as: “Are Toyota 4Runners expensive to insure?”.
Trying to Pay off Multiple Debts at Once
Do you have debts coming from numerous sources? If so, trying to address each one every month is a bad move. Instead, deal with the debt with the highest interest rate first, and then move down to the card with the next highest interest rate until all of your debt is gone. Needless to say, you should make your minimum payment on all debts every month.
Trying to Get Out of Debt Alone
Trying to get out of debt alone can feel like you have the weight of the world on your shoulders, and it can have a negative impact on your health. Take advantage of the help that is available. If you don’t want to ask your friends or relatives, call a non-profit credit agency and get free help from professionals.
Do any of the errors above sound familiar? If so, take note of the advice that has been provided, and you will be a few steps closer to financial freedom.
