5 Money Mistakes that Keep Us in a Cycle of Debt

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I spent the first past of my years struggling to get out of debt. Sometimes it would feel like I was winning - I would pay off one debt one month and quickly create more debt the next month.

One day, I woke up, I was 27 years old and I was US$60,000 in debt.

Of course it didn't happen over night but I remember wondering how things got bad so fast?

I tried soo hard to stay in budget and to minimize all my wants and needs and things still went South.

I didn't know what I was doing wrong and it was a mystery to me how people ever stayed out of debt.

I made a lot of financial mistakes on my journey, but today I'm going to share the mistakes that keep most people in debt.

When I stopped making these mistakes, I was able to pay off US$60,000 in debt in 4 years.

1. Paying Debt in the Wrong Order

There’s a right way to pay off debt and that’s something I wish someone had told me.

You can be strategic in how you pay off your debt.

I always suggest listing your debt in descending order and focusing on paying off your smallest debts first so you are just left with one large debt at the end.

You could also find a way to pay off the highest interest debt first, so you are left with low interest rate debt.

2. Not Using 0% Balance Transfer Options

If there’s a credit card that allows you to transfer your balance to it from another credit card while offering 0% interest on that money, you should make the most of that.

Again, this is about minimizing the amount of interest you pay to creditors.

It might not seem like much but all those little sums of interest eventually start to add up over time, so they shouldn’t be ignored.

3. The Continued Accumulation of Debt

It might sound obvious, but it’s worth emphasizing: if you want to be debt free, you need to make sure that you’re not continuing to accumulate debt.

Resist any new credit cards offered to you, bank loans or store cards, no matter how good they sound.

Resist the urge to use debt to cover emergencies, instead focus on building an emergency account so you have money in case of emergencies.

4. Not Getting Financially Educated

If you fail to work on your money mindset and you neglect to educate yourself about money and the practical aspects of finance, you’ll always struggle with debt.

Knowledge is power, and that’s certainly true when you’re working on becoming debt free. My advice is: read personal finance blogs for at least 5 mins a day, follow money mindset coaches on social media, sign up for online personal finance courses, get a coach.

Basically utilize free and paid resources because they will change your life.

If you are in the US, check out this DTSS U.S. review, as an additional resource.

5. Only Paying the Minimum Each Month

People very often make the mistake of only paying back the minimum amount of debt each month. This is the amount that your creditors demand you pay back.

It's a trap. Don't fall for it.

You should always try to pay more than the required minimum, if you want to clear your debts quickly.

Getting out of debt is always feels like a huge challenge, but as one of the #MoneyMagic students says - “The air hits different when you are debt free. ”

How is your journey to getting out of debt going?

Share in the comments section below.