There’s no doubt about it: personal debt is on the rise in the USA, which is somewhat mystifying. One might have hoped that the popping of the last credit bubble would have lead to a change of habits, a lack of acceptance amongst the populace in regards to debt, and a countrywide approach to everyone living within their means.
However, all of the above are easier said than done. Financial recovery has been slow from the 2008 crash, and wage growth is still struggling. Many people and families simply have no other way of meeting their expenses than by turning to credit, so the personal debt problem continues to grow.
While some people do carry on regardless with their debt, not seeing it as a particularly concerning problem, millions of people do try to tackle the issue– yet for some reason, so many of these people fail. Given that, in terms of the raw numbers, paying off debt should be rather simple, it’s worth investigating what’s going wrong, especially if you are trying to make roads into paying off your own debt. Below are five common reasons that debt repayment strategies fail, which should hopefully provide you with a “things not to do” list in regards to your own repayment efforts.
#1 – Being too strict
When someone decides to cut their debt, they will likely examine their monthly outgoings and rip them to shreds. All but the most basic necessities are removed; no entertainment, no new clothes, no meals out, and so on and so forth.
This strategy might work for a few months but, eventually, living such a fun-free life begins to take its toll– and people slip. When you’ve slipped once, it’s easy to just keep slipping, and eventually, the debt repayment strategy completely unravels.
You have to give yourself some flex in your new budget; some acknowledgement that you’re still a person and you’re still going to want to enjoy life. Ironically, spending less on debt repayments in favor of an entertainment budget can actually keep you repaying your debt more successfully.
#2 – Ignoring interest
Interest rates are the main enemy of people trying to repay debt. If you make a $50 payment, you want to see your balance reduce by $50– but it won’t, because of the interest. The matter is made even more complicated when you add in compound interest issues.
Interest rates have to be tackled if you are going to make any true inroads into your debt repayments. Call your creditors to ask them to freeze the interest or look into the possibility of debt consolidation with the likes of National Debt Relief; both of these options will help control interest from spiraling out of control and allow you to actually reduce your balance.
#3 – Lack of commitment
Finally, one of the biggest issues people experience when trying to repay debt is the fact that they’re not really that committed to repaying debt. They know they should, but they don’t feel it’s a priority. As a result, they simply don’t dedicate themselves to the task, which means that their efforts are never quite significant enough to make a real difference.
If you’re going to tackle debt, then you have to commit, 100%, to the task. Just try and remember that it’s short-term pain for long term financial safety, independence, and security, so it’s well worth doing.
In conclusion
By avoiding these three key reasons why debt repayment strategies fail, you can actively tackle your own debt and make a genuine difference to your financial outlook.
Once we decided to get out of debt, the very first thing that we do is set up a debt payment plan. Assuming that a debt repayment plan is already established, the real challenge for a lot of people is #3 which is commitment. or what I always call self-discipline a.k.a debt discipline. This is where the struggle really starts. We tend to make excuses for not making the planned amount of payment. The “I will just pay extra next month” seemed so much easier. We need to strictly follow the plan.
The Bible says to owe no one anything but love, and the borrower becomes a slave to the lender. I don’t think repayment plans work because a third party has to get involved usually for a fee which will incur more debt. I suggest that before committing to any debt the payoff amount and terms should be clearly stated with dates. You can’t pay debt forever usuary is also a sin and the interest today is outrageous. Compounded interest should only be used as an investment tool not a repayment of debt, that’s like adding more fuel to the fire.