Let’s start with the most obvious mistake; spending more than you earn. As long as you are earning enough money to cover your expenses, it doesn’t matter what you spend it on. But if your expenses exceed your income, then that’s when the money problems start to happen and spiral out of control.
We’ve seen so many people make this mistake. They think that if they earn more money, they have to spend it all.
There are a few simple things you can do to avoid this mistake. We’ll list them here, but you should also read our other posts here.
1. Create a budget and stick to it
Your income and expenses will fluctuate, but you always need to have a budget that you can live on. Allocate the money you’re going to earn for your expenses. Try to make sure that most of your income goes towards paying off debt and saving.
2. Don’t buy stuff you don’t need
When you get a pay raise, it could be tempting to spend that extra money on stuff for yourself. But if you don’t really need it, then make the right decision to apply it to debt or your savings/investments. Investments over luxuries, then allow those investment cashflow cover your luxuries.
3. Stop giving money away to banks
If you’re in high credit card debt or any other unsecured debt, then you can’t afford those things you were thinking of buying or spoiling yourself with. If the balance is over $10k, then consider debt resolution options.
Always try to pay down the entire balance or you may find yourself paying too much in interest and digging your self a much bigger hole that may wipe you out if not addressed soon enough.
If your debts are low and you pay down the entire credit card balance each month, then you might want to consider paying extra attention to your investments. Put your money to work.
4. Keep your expenses low
If you’re like the average household in America and carry debt each month, try to lower your spending in other areas, if at all possible. Take some time to go through your bank statements and decide what needs to get cut out of the monthly budget until your are back to a positive balance. It may take some time but it’s worth it. If your current income doesn’t cover all the expenses even after budgeting, then consider getting an additional job, or asking family and friends to help you. We have all been there and it’s ok to ask for help. People close to us would rather us say something!
5. Negotiate your debt
You should always try to negotiate your debt.
If you are in collections, know that they will settle fro a much lower payout. Sometimes as low as 80% off of the entire bill. They purchased your debt for pennies, they are willing to get whatever they can. Settle it and get those negative items off of your credit report ASAP.
6. Don’t miss a payment
Bare Minimum – ALWAYS at least make the minimum payment. Never miss a single payment.
Some people think it’s ok to miss a payment, but your credit score doesn’t thing so.
Not only does it get recorded on your credit history, and lowers your FICO score, you also opt in to pay more interest for now reason.
If you can’t make the minimum payment, ask for help, but don’t cause more damage that will require credit repair services in the future just to get back to square one.
