| Biggest Debt Mistakes |
| By Credit Federal |
Published
07/14/2008
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Debt Help
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Common Debt Mistakes to Avoid and Tips to Payoff Bills
Some people with debt problems focus mainly on the little splurges which save only a few dollars, while ignoring the high cost expenses that could really amount to huge savings. For example, many people are paying for autos which they don't really need. Of course they need a vehicle to get to and from work, to buy groceries, etc, but do they really need a gas-guzzler? Do they really need an auto that is loaded with various, unnecessary and costly extras like a multiple CD changer and electric seats? Consider trading down - get an auto that costs much, much less and gets far better gas mileage.Some people find it very difficult to trim the fat from their budget. Certain expenses they feel they absolutely must have, because they are unable to separate true 'needs' from mere 'wants'. Certainly things like a place to live; some sort of transportion (either a vehicle or public transit); food, clothing and medical are definite needs. Yet even though food is a definite need, eating steak nightly is not. And, though clothing is a need, designer brands are not. So off-the-rack slacks are a need, but Gucci slacks are not.Another common problem is when you consider only the short term expense of a purchase, ignoring the long term costs. Purchasing a cell phone and budgeting only for the monthly plan payments is one example. What about the costs for exceeding the alloted minutes? What about roaming and long distance charges? What about battery replacement costs? If you accidentally drop the phone or run it through your clothes-washer, what about the replacement cost?Would you agree that it's stupid to pay more than once for the same purchase you already made? Of course you would. But many people fail to see that this is exactly what they are doing when they continually carry credit card debt. If you don't pay your balance in full each month, you're giving up money and basically paying more than the original purchase price. You wouldn't voluntarily pay double at your grocery store, so why pay double to your credit card company simply for temporarily loaning you money for the purchase? Payoff credit card bills in full every month. And when you pay your credit card balance in full every month, don't feel sorry for your credit card company about the extra free perks they awarded to you... credit card companies make money in other ways such as transaction fees they charge merchants, or the interest earnings from customers who don't payoff charges in full each month. If you cannot payoff credit card balances right now, stop charging and focus on getting them paidoff so you can in the future.With the economy as it currently is and the high costs of fuel, many of us are spending nearly all of our income just to stay alive. Not having a wide buffer zone between income and debt is dangerous. As prices rise, the buffer decreases. One emergency expense (like needing a new tire, a hospital visit, or worse the loss of employment) and the problem has become worse. But since we cannot go back into time and undo purchases, get your debt paidoff as quickly as possible so you'll have a larger buffer. Buy clothes off the rack, not off 5th Avenue. Build a buffer and a savings account worth three months of income. Not only can getting out of debt improve your personal finances, it can also help improve credit scores, thus saving you even more money because you'll get better rates of future lines of credit.Another misconception some people have, is that they need to get out of debt today in order to have financial security when they retire. While that's true to a large degree, it doesn't mean you should rob from your retirement. When you do, you lose money in taxes and penalties, and the money is no longer there to grow and support you in retirement.Read more free tips on how to reduce bills, how to payoff credit card debt, how to negotiate debt settlement, and get facts about credit counseling.Track expenses to see where every cent of your money goes. CreditFederal offers a broad range of personal budget calculators for online use or to download.
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