Building Healthy Relashionship With Money

Eliminating debt is more than just paying off credit cards and other bills. It means developing a new relationship with money, including learning how to make a budget, changing how money is spent, knowing what is owed and building an emergency fund for the unexpected. One step toward financial freedom is personal loans bad credit. Along the way, there are other pitfalls that should be avoided.

1. Not Changing Spending Habits
Most people do things out of habit, and this includes spending. The reality is if spending habits do not change, the debt will never go away. Some easy ways to spend less include having breakfast at home, taking a lunch to work and watching movies and sports on television instead of going out. It is all about making better choices.

2. Trying to Get Out of Debt Alone
It is awkward to ask friends and family members for financial help. Engaging a non-profit credit counselor will provide debt relief through consolidation, management, settlement or bankruptcy. The service is free.

3. Not Understanding a Debt-Relief Program
Debt problems cannot be fixed quickly. In most cases, it takes three to five years to get out of debt. Before committing to a debt-relief program, it is crucial to check its reputation against the state attorney’s office or the Better Business Bureau. It should also be licensed and not have a consumer complaint record.

4. Not Creating a Realistic Budget
It is difficult to gain control of finances without a realistic budget. This should cover food, housing, insurance, health care and educational needs and leave enough to cover debt. Paying with cash will limit spending to only what is needed.

5. Trying to Pay off Multiple Debts Each Month
Focusing on multiple debt sources, such as mortgage payments, credit cards and student loans is not a good approach. Trimming the budget to the bare essentials and putting a surplus toward the debt with the highest interest rate will get it eliminated faster. As one is paid off, move on to the next until all the debt is cleared.

6. Closing Paid Accounts
After accounts are paid off, they should be left open. This will show restraint on spending when credit is available and will improve a score.

7. Not Saving for Retirement
While paying off debt is important, it should not interfere with retirement savings. At least five to 10 percent of income should be placed in a retirement fund as early as possible. There are other places in the budget to cut back for debt.

8. Not Saving for Emergencies
It is not possible to predict emergencies, which means at least five percent of income should be set aside as a contingency. This can be challenging when paying off debt, but it is necessary to avoid more debt in an emergency situation.

9. Not Checking a Credit Report
Inaccuracies on a credit report can mean being unable to buy a car, a home or obtaining more credit. They can also lower a credit score. TransUnion, Experian and Equifax allow for free reports, and they should be checked frequently for errors.

10. Not Making Debt a Priority
For those who have difficulty prioritizing debt, consolidation is an excellent option. This means one payment per month instead of having to remember several at different times. Another method is writing down the five most important debts and taping the paper to a credit card. Every time the card is pulled out, there is an instant reminder that another purchase will add to the debt problem.