15 Mistakes You’re Making While Paying off Debt

cash and checkbook on table

Do you ever feel overwhelmed by your debt?
 
Maybe you’ve bought a financial book to help get you started. And you’ve subscribed to the most popular blogs on finance. 

But somehow, it’s not working.
 
So you ask yourself:
 
Will I be stuck with my debt for 10, 20, or even 30 years?
 
Should I just accept the fact that this is my “new normal”?
 
Thoughts like that can paralyze even the best of us. But you should know that you’re not alone.
 
One of the most often asked questions in my inbox is:
 
What do I do when it seems like I’m not making progress on my debt?
 
So let’s talk about the most common debt mistakes people make.
 
And word to the wise:
 
If you’re making 4 of these or more, then it’s holding you back from becoming debt free.
 
Ready to find out?
 

(This post might contain affiliate links. Check out our full disclosure policy here!)

 

Mistake 1: Failing to Budget

man writing out household budget

Imagine with me if you will…
 
You’re going on vacation to the beach.
 
You’re excited to feel the warm sand between your toes. You can already picture the waves coming in and the smell of the fresh saltwater. You’ve got your suitcase packed and ready to go. 
 
But there’s one problem.
 
You have no directions.
 
How will you make it there?
 
Think about it like this:
 
Your budget is your road map, and becoming debt-free is your destination.
 
If you don’t give yourself a roadmap, then you risk staying stuck like a hamster in a wheel.
 
So get clear on your numbers.
 
You need to know how much is coming in each month and how much absolutely needs to go out. 
 
Are you ready?

__________

“A budget is you telling your money where to go instead of wondering where it went.”

-John Maxwell

__________

Debt Payoff Worksheet 

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Mistake 2: No Emergency Fund

dollar bills

Let’s face it.
 
Sh-t happens.
 
In the same year, I have two major expenses pop up that cost me thousands of dollars.
 
That’s what my emergency fund was for.
 
Except, I didn’t have one.
 
Here’s the thing:
 
Nothing will sabotage your financial plan faster than an unexpected expense.
 
Car break down? Put it on the credit card.
 
Medical expense pop up? Put it on the credit card.
 
Water heater goes out? Put it on the credit card.
 
That’s your reality when you don’t have an emergency fund.
 
Think about it:
 
Your emergency fund is your barrier against new debt.
 
It can mean the difference between a small sting in your financial life or a total train wreck.
 
So do something now that you will thank yourself for later.
 
Save up $1,000 for your emergency fund. Next, you can work on tackling your debt.

__________

“It’s not how much money you make, but how much money you keep”

-Robert Kiyosaki

__________

 

Mistake 3: Not Saving While You Spend

pink piggy bank

Do you like saving time and money?
 
But maybe you don’t always have time to clip coupons. Or search for the best deals.
 
My recommendation?
 
Use a cash back app like Ebates instead.
 
What is Ebates?
 
Ebates is a rewards program that helps you save money on everything you buy. It’s an effortless way to get great deals.
 
Like last year when I replaced my oven, I got $63 from that purchase alone.
 
The best part?
 
Ebates works with over 2,500 stores – including big names like Amazon and Walmart.
 
So here’s how it works:
 
You sign up for a free account and use the search bar to find the retailer you want to shop at.
 
For my visual readers, here’s how that looks:

Ebates homepage gif

As you make purchases, you’ll earn cash back.

It’s important that you save as much money as possible when you’re paying off debt.
 
But fair warning:
 
Use Ebates to save money on the things you know you need.
 
It’s easy to go overboard with spending when you’re getting a bargain.
 
Remember, it’s not a good deal if you don’t need it.
 

Note: The Ebates link gives you a $10 bonus for signing up and shopping.

__________

“If you think nobody cares if you’re alive, try missing a couple of car payments.”

-Earl Wilson

__________

Mistake 4: Not Using a Debt Payoff Method

calculator and bills

Do you ever feel like you’re not making progress on your debt?
 
There’s no doubt about it.
 
Paying off debt can be a long process. But it’s even longer when you don’t have a debt payoff method.
 
My advice?
 
Create a plan and work your plan.
 
Pick between these two popular debt payoff methods:
 
1. The Debt Snowball
2. The Debt Avalanche
 
Both of them work beautifully, so it doesn’t matter which one you choose. Just as long as you stick with it.
 
Because you don’t want to stay stuck with your debt any longer than you have to, right?
 
If you need help deciding which one to pick, then read our guide:
 
 
You’ll be glad you did.
 
Debt Payoff Worksheet 

Tired of feeling overwhelmed by your debt?

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Mistake 5: Keeping High-Interest Rates

man holding a credit card

Have you ever realized that most of your payment goes towards interest instead of principal?
 
Not a fun feeling, is it?
 
Here’s the deal:
 
Lenders make a ton of money off of interest.
 
But just because you can’t afford to pay off the balance right away, it doesn’t mean you should settle for a high-interest rate.
 
Locking in a better interest rate can save you thousands of dollars.
 
And more importantly:
 
A lower interest rate comes with a lower monthly payment.
 
So I recommend transferring your balances to a lower rate card or using a company like SoFi to help you lock in a better rate.
 
SoFi offers two free services:
 
1. Student Loan Refinancing
2. Personal Loans
 
What is student loan refinancing?
 
When they refinance your loans, they pay off your existing loans and give you a new loan with a better rate.
 
If you have multiple loans, this means they’ll combine everything into a new, single loan. This makes keeping track of your bills simple.
 
(You can also refinance if you have just one loan)
 
What are personal loans?
 
Personal loans are ideal for credit cards and other types of debt. If you carry a high interest rate on your credit cards, for example, then you can move that balance over to a personal loan.
 
Bottom line?
 
Know your options. Don’t feel stuck with a high interest rate. Do what you can to lower it.
 
Note: You can read more about SoFi in our SoFi Review
 

Mistake 6: Budgeting…but on an irregular basis

man budgeting his money

Yo-yo budgeting is like yo-yo dieting. Sometimes you’re full swing with it; other times you’ve completely fallen off the wagon.
 
Don’t fall into that trap.
 
Budgeting is a skill like any other. It takes time and practice.
 
View your budget as an investment into your financial future. Take a few minutes each week to check in with your spending.
 
See it as “mini-meetings” with yourself.
 
Stay on track with your budget, and watch as you slowly take back control of your financial life.
 

__________

“It is not the man who has too little, but the man who craves more, that is poor.”

-Seneca

__________

Mistake 7: Keeping the Never Ending Payments

pile of credit cards

Has this ever happened to you?
 
You’ve worked hard. You’re focused. You’re full-speed ahead in your debt-free journey.
 
But a shiny object catches your attention.
 
Maybe it’s the newest iPhone. Or a shopping spree with your friends.
 
Or worse:
 
You need a new car, so instead of getting a modest vehicle, you drop $25,000.
 
Next thing you know, you’re stuck with the payments. 
 
It’s an easy trap to fall into, but let me ask you:
 
What could you do with your life if you didn’t have a single debt payment in the world?
 
Think about that before you spend money on low-value purchases.
 

__________

“I love money. I love everything about it. I bought some pretty good stuff. Got me a $300 pair of socks. Got a fur sink. An electric dog polisher. A gasoline powered turtleneck sweater. And, of course, I bought some dumb stuff, too.”

-Steve Martin

__________

Mistake 8: Not Putting Extra Money Towards Debt

woman budgeting

Let’s face it.
 
Extra money is tempting.
 
I’ve worked so hard for this, so I should reward myself, right?
 
If you aren’t careful, that mindset can lead you to lifestyle inflation. This means when your income goes up, your expenses rise to match it.
 
So do this instead:
 
Whether you get a raise, bonus, or tax refund – pick a small amount to treat yourself with and throw the rest at your debt.
 
It’s hard to scale your lifestyle back, so try not to increase it in the first place.

 

Mistake 9: Refusing to Talk About Money With Your Partner

couple looking at laptop

Do you know one of the main issues couples fight about?
 
You’re right – it’s money.
 
It’s also the second cause of divorce in America.
 
I know. I know.
 
Talking to your partner about money isn’t always easy, but it’s worth it.
 
Think about it like this:
 
When you share the money decisions, you’ll have a support system.
 
What does that mean for you?
 
It means you’re much more likely to stay on track.
 
What’s more:
 
Research shows that couples who talk about their finances are 50% more likely to say they’re “extremely happy” in their relationship.
 
They’re also 14% less likely to argue about finances and 37% more likely to say they have “great” sex.
 
Who knew that talking about money could improve your sex life?

__________

“People often say that motivation doesn’t last. Well, neither does bathing – that’s why we recommend it daily.”

-Zig Ziglar

__________

Mistake 10: Thinking You’re Not in Debt Because it’s 0% Interest

piggy bank dumped over in water

Debt is debt. No matter the interest rate.

Try missing a payment and see what happens.

It’s not yours until you’ve paid for it completely. It’s still debt, so treat it that way.

__________

“Take care of the pennies and the dollars will take care of themselves.”

-William Lowden

__________

Mistake 11: Borrowing From Your 401(k)

office desk with finance paper on it

Admit it.
 
You’ve thought about digging into your 401(k).
 
But listen, don’t rob from your future self to make current ends meet.
 
Borrowing from your 401(k) goes against the very reason you started contributing to it in the first place.
 
“Pay yourself first” is the golden rule of personal finance, so don’t break it.
 
And get this:
 
If you take money from your 401(k) before you’re 59 1/2, then you’ll have to pay a 10% early withdrawal penalty AND income tax.
 
Promise me you won’t do that.
 
Promise?
 

Mistake 12: Not Having a Side Hustle

man typing on laptop

Two things are true when it comes to getting out of debt:
 
Earn more or spend less.
 
And ideally, you’d do both.
 
Whether it’s selling on eBay or cleaning someone’s house – try to figure out how you can bring home more money.
 
Even if you talk to your boss about getting overtime, increasing your hours could be just the boost you need.
 
Plus, there are plenty of ways to make money from home these days.
 
Staying up late, waking up early. You’re motivated.
 
Are you ready to do this?
 

__________

“Every time you borrow money, you’re robbing your future self.”

– Nathan W. Morris

__________

Mistake 13: Lacking Financial Goals

goals written on napkin

Can we be honest?
 
Saving money for the sake of saving money doesn’t usually work for most of us.
 
You have to have a strong why.
 
So get specific about what goals you want to achieve.
 
Do you want to go back to college?
 
Pay off your mortgage?
 
Be debt free?
 
Think about these things. Get absolutely clear on them. 
 
Once you do, saving money will become something you can actually work towards.
 

Mistake 14: Failing to Say “No”

two guys hanging out

You know those friends that can only have fun by doing things that cost money?
 
You know how it is.
 
But here’s the deal:
 
Add “fun” money into your budget, but make sure you actually stick to it. When it runs out, then it’s time to say “no.”
 
 

__________

“You must gain control over your money or the lack of it will forever control you.”

– Dave Ramsey

__________

 

Mistake 15: Feeling Guilty About Giving Yourself an Allowance

woman doing bills

Do you ever feel like you need a bare bones budget to make this work?
 
And when you give yourself “fun money”, you feel bad about it?
 
Look at it this way:
 
You’re in this for the long haul, so it’s important that you cut yourself some slack.
 
So budget yourself a small and guilt free allowance of 5-10% each month. Since you’ve already budgeted for it, you should allow yourself to spend it freely.
 
Don’t feel guilty.
 
You’re motivated. You’re dedicated. And you’ll do whatever it takes to get there.
 
Commit yourself to your journey.
 
To changing your spending habits. To tracking your expenses. To proving to yourself that you can do this.
 
That’s how change begins.
 
Are you ready?
 
 
Debt Breakdown Worksheet

Tired of feeling overwhelmed by your debt?

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7 thoughts on “15 Mistakes You’re Making While Paying off Debt”

  1. Great article.
    Very motivational!
    Tip: my side gig is selling blood and bone marrow. ChaChing $$

    • Way to go Melanie! Great tip for the readers. Thanks for commenting.

  2. Awesome tips 👍

  3. Hi we are really trying to get out of debt and start living life to the full and have a fabulous future.

  4. How do you budget when your income is always changing? I can make a few hundred dollars more or less from one day to the next.

    • My income also fluctuates, sometimes significantly by several hundred dollars every two weeks. And I can go several months with very little income, making it difficult to hold on to or continue building any savings I’ve piled up during my high-income months. Small business owner and private practice psychotherapist. Any advice for budgeting/saving/paying off debt given these circumstances?

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