Hey, this is Chris with Money Burst, back with another video to help you master your finances. And so today we are talking about the top 5 mistakes that people make when paying off their debt. So, let's just get right into it.
Mistake number 1: Only paying the minimum.
While it may be a lot easier to keep your payments low, you're actually extending the life of your debt and increasing the total amount of interest that you end up paying over the life of this debt. So always aim to pay more than the minimum if you can.
Mistake number 2: Ignoring your interest rates.
So not all debt is created equal. Debt with higher interest rates costs more over time, so prioritizing these high interest debts when making your monthly payments can save you real money in the long run.
Mistake number 3: Not having a debt payoff plan.
So, whether it is the snowball method, the avalanche method, or something else altogether, having a plan is key to staying focused and making consistent progress towards becoming debt free.
Mistake number 4: Racking up new debt.
So, you're really just fighting against yourself if you're trying to pay off old debt while at the same time accumulating new debt. So do whatever you can to put a stop to the cycle, even if it means you're going to cut up your credit cards and switch to cash for a period of time.
Mistake number 5: Neglecting your emergency fund.
Even while paying off debt, and I can't stress this enough, it is so important to have money set aside for those unexpected emergencies and expenses that always pop up. An emergency fund acts like a financial safety net, and it can help prevent you from falling back into debt that you're trying to escape.