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Five Mistakes People Make When Managing Debt

Five Mistakes People Make When Managing Debt

Debt is something that affects a lot of Australians. The problem with debt has something to do with bad habits and poor budgeting. Despite how simple these things usually are, a lot of people seem to completely forget them and it can drown them in debt. We have narrowed down some of the most common mistakes that people to help you avoid them. Check them out below:

1. Not paying on time: There are the late payment fees, which can run into the hundreds every month, and you also miss out on ‘interest free period’ offerings for any new purchases. Late payment fees can also accumulate which makes it a lot harder to pay off.

2. Only making the minimum payment: If you are only covering the interest, then it’s dead money. You need to pay as much above the minimum as you can.

3. Not communicating with your bank: If you cannot make this month’s payment, then get on the phone. The bank can defer the payment due date, which will save you late fees.

4. Consolidating and not closing: If you consolidate or transfer your balance, close your other debts. An empty credit card will find an expense.

5. Trying to get out of debt without a plan: You need a plan to pay down debt, which includes having a budget and a timeline.

What you can do

In order to avoid getting dragged into deeper debt, you need to avoid all the things that are mentioned above. However, there are also other simple things that you can do to help you get away from debt and stay out of it.

1. Use cash – Veering away from the usual way of using your credit card will give you a lot of benefits more than you thought it will.

Firstly, it takes away the possibility of you increasing your debt. That also means that you don’t have to pay for monthly interest that comes with it. Second, you get to meet the seller personally, making you build a relationship with your seller. Using cash is not only good for your bank account, but also for your general well being as well.

2. Buying only what you need – Rewarding yourself after all your hard work is not bad. However, buying everything that you see because you want to reward yourself is really dangerous.

Try to avoid sales because they usually trick you into making you think that you need an item because it’s on sale. If your clothes are still in good condition and they still look good, don’t be quick on ditching them right away.

Find ways to mix and match them with your other clothes and use the money that you are supposed to use on buying new clothes into something more important such as paying off old debt, groceries and utility bills.

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