For many of us, repaying debt is often a challenging and stress-inducing affair and we often find it easier to postpone it as much as we can or even avoid it. Unfortunately, this aggravates the problem and leads to more costs down the road. This state of affairs becomes a mental roadblock and it makes debt to be one of the biggest financial obstacles facing us in our lives today. Here are six mental roadblocks that are impeding your path to becoming debt-free and how you can overcome them.
I will pay off my debt later.
Many of us have been down this road. You feel that you still have a lot of time to repay the debt, and as a result, you reduce debt payment to the minimum possible. You promise yourself that you will start paying the following year and this becomes a habit. With time your debt balloons and becomes almost unmanageable.
You need to analyze, using a repayment calculator, the duration that you will need to clear your debt at the rate you are currently repaying it. Then examine your monthly budget to see what expenses can be trimmed down so that you are able to double or even triple your debt repayment. Then create, print, and implement a new repayment schedule-checking off each repayment until your debt is repaid fully.
A balance transfer, using a credit card, is a useful tool to incorporate into your repayment plan. Some credit cards offer a zero percent introductory APR rate for the first 15 months, zero annual fees, and no fees on the introductory balance transfer. This means you enjoy an interest-free 15 months once you move your debt balance to them. The only thing is that you must pay the whole balance within the 15-month-period.
I do not feel like using my hard-earned money to repay debt.
Nobody likes to use their hard-earned money to reduce debt. You would rather go on a vacation, put it in savings or buy a new appliance. But the reluctance to spend your money on debt payment will only make the debt become bigger, which means you will eventually spend more money on it. Remember that you borrowed to buy those things you wanted instead of buying using your income.
The first thing you need to acknowledge is that avoiding to spend your money on reducing debt will simply translate to more costly debt repayment later. An amortization calculator will clearly show you the interest costs accruing if you are paying only the minimum today. You may find that your repayment only goes to interest payments, leaving the principal amount intact. This is a timely warning sign that should stir you up.
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I prefer living ‘comfortably’, even if I am in debt.
Using borrowed money to live large and buy all manner of luxuries may feel nice, but the debts and bills will continue to accumulate. This can eventually result in stress, a broken family, and illness.
Examine the costs of the items that you desire now.For example, an item that costs 200 dollars that are borrowed at an interest rate of 12% will end up costing 79 dollars more if you are only paying 4 dollars every month on it. If you must have fashionable and luxurious items, try buying from platforms like eBay or Craigslist where you are likely to buy at lower prices. You can also buy good quality, bargain items in thrift stores. The money you save can then be channeled towards reducing your debt. Other money-saving measures that you can take include using coupons when eating out and carrying lunch to work. Remember that enjoying a fulfilling life ultimately comes from having a good family, real friends and great memories, not the things you can buy.
Debt is free money.
It is mind-boggling how a lot of people think that credit is free. Getting multiple credit cards and paying only the minimum every month is easy. Credit companies love it when you maintain high balances and pay the minimum amount every month. Paying the minimum amount only covers the interest element, while the principal sum remains stagnant. Every year you can end up paying thousands of dollars in terms of interest payments annually.
Firstly, you must internalize the fact that this is not free money. Then evaluate your household expenses and look at how much of it that you are committing to paying your credit card debt. If none is going into debt repayment, you must be overspending on clothing and groceries. Find out a way of avoiding to use those credit cards for some time, say, a few months. Shop using cash, debit cards or checks, and focus on reducing your debt. After several months of doing this, reassess the situation. You may find that in fact, you do not have to use those credit cards after all.
Everybody owes money.
This is not entirely true, even though the number of people in debt is incredibly high. About 4 out of every 5 Americans are carrying a debt, and this includes mortgages (44%). When it comes to credit cards, only less than half of Americans carry over their credit balances every month.
Focus on your own debt since you do not know the kind of financial obstacles being faced by those others who are in debt. Use a notepad or spreadsheet to analyze it and look at various options that can help you reduce it. Useful options that you can consider include loan consolidation and transferring the balance to another credit card so you can enjoy zero interest for a year. This way, you can begin reducing your debt balance each month.
I will never be debt-free, so why bother?
Sadly, debt has become such a major part of our lives that it seems like there is no other way. This is simply not true and even if the loans and credit cards may have got you out of a sticky situation, you can live without them.
Convince yourself that you can get out of this debt trap. Collect all your month bills and sort them, starting with the smallest balance. You need to commit as much as you can towards paying off the smallest debt and pay the minimum amount on the other debt balances. Once you clear the first debt, apply this method to the next smallest balance, and continue until you pay off all the debt balances. The feeling of achievement that you will get from paying off the smallest balances first will give you the motivation to tackle the big debts.
All Coast Funding is a leader in the consumer finance industry. With years of combined experience in the world of finance, we’ve helped people overcome their financial difficulties and work towards the financial freedom they have always wanted. For more information on our programs or services, call us at 1-888-220-7651 or send us an email at email@example.com.