We often make debt reduction much more difficult on ourselves than it needs to be. Usually it is the culmination of a collection of small blindspot mistakes. We’ve analysed the most frequently made mistakes and missteps and the best ways to avoid them.
1. Heads in the sand
Burying your head in the sand by ignoring your debt problem, or refusing to tackle it head on, can be the most harmful mistake to make when it comes to debt. It might be an awful thing for you to think about, and difficult at first, but in the long run its deeply satisfying and empowering to have regained control of your finances.
2. Doing the absolute minimum required
Try to avoid a ‘good enough’ attitude when it comes to repaying debt, but aim to bring a real standard of excellence and positivity to this most important part of your life. Exceeding minimum payments is possible with a bit of extra sacrifice and careful belt-tightening. Aiming to pay off debt as fast as possible means you’ll avoid those pesky fees and charges than can come with a too-casual attitude.
3. Concerning ourselves merely with symptoms, not the source
If we observe patterns of recurring debt (particularly avoidable debt) then we must be prepared to examine the reasons for incurring these debts, not just being rigorous in repayment, as good as that is. We can avoid a debt cycle by avoiding choosing to take on loans for any reasons that are frivolous, such as spontaneous sale purchases or last-minute entertainment bookings (U2 may be in town, but do they really still have enough allure to justify borrowing!). When it comes to money, we have to examine underlying ‘relationship issues’ if we want to maintain a healthy outlook on borrowing.
4. We’re juggling too many balls (it’s time to just focus on one).
It’s easy to make excuses for procrastinating when it comes to following through on personal debt reduction. We do it with many other things in life: exercise, laundry, Christmas shopping – the list is endless! We also attach conditions to beginning the hard work. ‘I’ll really focus on paying off my debts as soon as…’ ‘Once I’m earning more, then I’ll think about my debt’.
We can easily make excuses, but we just need to start putting one foot in front of the other. At the gym the first kilometre on the treadmill is always the hardest, but it’s absolutely worth it in the end.
5. We’re being too vague
We can all relate to make that New Year’s resolution that fizzles out after a couple of weeks because we didn’t make plans with enough specifics and detail. We relied on emotional enthusiasm but as soon as we felt unmotivated we fell down. It isn’t enough to just want to get control of debt, but we need to set specific financial goals to work towards. Pablo Picasso made a wise reflection on goal setting: “Our goals can only be reached through a vehicle of a plan, in which we must fervently believe, and upon which we must vigorously act. There is no other route to success.”
6. We fail to budget, and stick to it
It’s not enough to go by a gut-feeling on how much you are spending. It’s natural to vastly underestimate how much we actually spend in the main areas. Have a quick scan through your last three months transactions and tally up every outgoing on food – we guarantee you’re in for a surprise! Using a budget is the best way to get the complete picture of our actual incomings and outgoings, and identify the main contributors to imbalance. Also, it’s a great way to identify outgoings we can cut back on. Too many laybuy purchases? Too many flat whites a week?
7. Too proud to ask for help
There’s no shame in not being the best at financial management. We’re all differently gifted and you might be able to greatly help others in things you’re strong at, in the same way friends and family with money skills will be able to help you – you just have to ask!