Manage Debt By Looking Back
As you struggle to find ways to manage debt, you wonder how you got under a mound of financial obligations. Keep on with these thoughts since retracing your steps may just lead you to your way out of the money pit. I’m talking about money mistakes you may have committed that led one thing to another. These boo-boos can be curbed with discipline and by changing unhealthy behavior. Here are 4 money mistakes that you may identify with and learn how to fix them as part of your plan to begin paying off your debts.
Manage Debt By Fixing These Bad Money Habits
1. Paying the monthly minimum due only
Paying the minimum may not incur you any late charges and is preferable than not making payments at all, but the unpaid portion will add to your outstanding balance, hence increasing the interest that you have to pay. The savings you get from the pair of shoes you bought on sale with plastic will only be negated by this interest. Translation: it will not lead you anywhere in paying off credit card debt, but may even fuel your balance to spiral even more.
Fix this by: trying to pay in full to stop paying for finance charges. If not, make it a point to pay more than the minimum, as close to the balance as possible. This is quite difficult especially if you accumulated a substantial balance already. If so, never use your card again until you have paid in full already. Work out to bring your expenses down to the essentials. Another option would be for you to take a part-time job as an extra source of income to pay off the balance.
2. Late payments
Worse habit than paying only the minimum. Perhaps you think that the late penalty is a negligible amount, but you could have used it to help whittle down your balance. Instead, by defaulting, you even help in compounding interest. Your other creditors, with the help of the universal clause hidden in fine print, can jack up your interest rate despite your pristine payment record with them. Talking about blemishing your credit history, but this will be discussed as another money blunder.
Fix this by: setting reminders of payment dues by marking them on calendars, setting automatic reminders on the calendar on your computer and other gadgets or even through a computer software you can find online. If you pay through the mail, send them in advance, say ten days. To save you the hassle, you can also pay online. If despite these you still fall behind in payments, get in touch with your creditors, explain your situation and request that the late penalty be forgiven.
3. Not taking the time to inform creditors of your financial difficulty
Creditors are human too. Their hearts can melt too especially if you have a deserving story. If you are about to lose your job or have acquired an illness, notify your creditors.
Fix this by: calling up your creditors and negotiateing for better and affordable terms while your debts are still under control. You may request for a temporary reduction in interest rates or a payment deadline extension. By calling them, you may be introduced to help programs for clients that some creditors have.
4. Failing to verify credit report
You may think that you cannot alter your credit record. You are partly wrong there. Although you cannot remove unfavorable but accurate data, the Fair Credit Reporting Act allows you to weed out inaccurate, outdated or unverifiable details from your record when a reinvestigation covering on the disagreed detail is in your favor. Making these corrections may help you avail of better interest rates, or get a better job. But how can enjoy this if you do not check your credit report?
Fix this by: asking annually for a free copy from the major credit reporting agencies (Equifax, Experian and TransUnion). Check if data on your file are accurate and should you find any errors, write each of them a correction letter. You can dispute mistakes online with these agencies. You can do this yourself so forget about signing up with a credit repair company and use the money to pay these companies to pay for your debts instead. Unless, of course, if you do not have the tenacity to make these letters and follow up the bureaus. Just make sure that the alterations they promise are all legal.