The road to debt-free living is paved with good intentions. Debt mistakes such as closing old accounts or not creating a budget might seem insignificant, but they can add up over time. In this article, we’ll go over some of the most common mistakes that people make when they’re trying to get out of debt. So if you’re wondering how to get out of debt, then grab a cup of coffee and keep reading.

Common Debt Payoff Mistakes

Avoid these big mistakes when paying off debt: 

1. You stop contributing to your retirement account

Ceasing contributions to your retirement account can cost you long-term. Since your retirement account will support you after you stop working, it’s smart to start setting aside money for it today.

2. You don’t change the habits that got you into debt

If you continue to spend impulsively or not pay your balances in full, it’s unlikely that you’ll be able to kick your debt to the curb. While it may not be on the top of your list of fun things to do, taking time to reflect and change your money habits is essential for getting out of debt for good.

3. You close old accounts

You’re probably excited for the moment when you pay off your first account and can close it altogether. But before you do, consider your credit utilization ratio. This is the amount of credit you’re using compared to the total amount you have available. Closing old accounts can raise your ratio (you want it to be 30% or less). By paying off accounts and keeping them open, you’ll be able to lower your ratio and raise your score.

4. You don’t set any goals

Setting financial goals—like saving up for your honeymoon or a down payment on a house—is an important part of getting out of debt. Knowing your financial ‘why’ can help motivate you to stick with your payoff plan. Your goals can help you stay the course, even when it feels difficult.

5. You don’t save money for an emergency fund

Saving for an emergency fund is important, even if you’re still paying off debt. If you neglect to set aside money, you put yourself at risk of going further into debt should the unexpected occur, such as expensive medical bills. Three to six months of living expenses is recommended, although a year is preferred. Setting aside a little each month can add up over time.

6. You forget to look at your credit report

Checking your credit report for inaccuracies and getting them removed can be an easy way to boost your credit score. Since mistakes on your credit report can have a negative effect on your credit score and your ability to get approved for loans, it’s important to look at it periodically.

7. You don’t create a budget

If you don’t create a budget, you’re pretty much just spending as usual and hoping for the best. And let’s be real, optimism is fantastic but not a great financial planning tool. To really keep yourself accountable and on track for financial success, you need to create and follow a realistic budget.

To create a budget, look at your post-tax income and your monthly expenses. Make sure to consider both fixed expenses, which stay the same every month (e.g. rent) and variable expenses, which can change (e.g. food). You want to make sure that you’re spending more than you’re saving. If not, it’s time to make some changes and cut out what you don’t actually need.

8. You don’t understand your debt-relief program

If you’ve decided to move forward with a debt-relief program, you need to make sure that it’s legit. Do some research with your local state attorney’s office or the Better Business Bureau. You’ll want to make sure that it’s both licensed and doesn’t have a laundry list of complaints.

9. You try paying off everything at once

Trying to pay off everything at once can be both ineffective and disheartening. It’s likely that your progress will be slow, and you won’t see tangible results to keep you going. But choosing a debt payoff method, such as the debt avalanche or debt snowball methods, can give you a plan of attack for eliminating your bills.

Debt avalanche: With the debt avalanche method, you’ll focus your attention on getting rid of your balance with the highest interest rates. You’ll continue paying minimum amounts on the rest of your balances, but extra cash will go to the one with the highest rate. Once that’s paid off, you’ll focus on paying off the next highest interest rate. The debt avalanche is best for saving more money overall.

Debt snowball: With the debt snowball method, you’ll instead focus on paying off your smallest debt first. Like the debt avalanche method, you’ll pay the minimum amounts on your bills, but instead of focusing on the balance with the highest interest rate, you’ll put extra cash towards the smallest balance. Once that’s paid off, you’ll pay off the second-smallest balance. The debt snowball is best for those who need a little encouragement for paying off debt.

10. You keep delaying your payoff plans

One of the most important steps of paying off debt, if not the most important one, is just getting started. Waiting for the perfect time or a bonus at work can make it so that you never get started. Remember that there’s no magical moment to start getting rid of debt. The best time to start is right now.

How To Get Out Of Debt Fast

If you’re wondering how to pay off debt quickly, you may want to consider lowering your interest rates. Here are three ways you can decrease your rates:

Low-interest credit card:

If you have a good credit score, you may qualify for a new credit card that has a lower interest rate than the card you’re currently using.

Balance transfer:

A balance transfer is when you move your existing credit card loans to a new balance transfer credit card with a 0% APR introductory period. If you can pay off your balances during the period, you’ll save on interest. However, if you can’t pay your bills by the time the intro period is over, you could be stuck with a very high interest rate.

Personal loan:

You could also take out a personal loan, which tend to have lower interest rates than credit cards. You’ll have a set repayment schedule and will only need to worry about paying one bill per month.

Paying off debt might feel intimidating, but we know you can do it. By focusing on your ‘why,’ selecting a debt payoff method, avoiding some of these common mistakes, and securing a lower interest rate, you’ll be on your way to debt-free future before you know it.