It's time to kick debt to the curb
It’s a new year, and you’re ready to kick debt to the curb. 🥾 Although you may feel like the task is impossible, we’re here to tell you it’s not! There are, however, a few hiccups you may encounter along the way that can deter you from accomplishing your goal. If you’re ready to buckle down and pay off debt, avoid these three mistakes:
1. Not addressing the root cause
People often repeat the same bad habits if they don’t address the root cause of the issue. When it comes to debt, the root cause is usually one of two things: Not having an emergency fund or living beyond your means. 💅
Regardless of whether you went into debt because of a job loss or an avalanche of unanticipated expenses, you should prepare for life’s curveballs by having an emergency savings fund in place. Most experts agree that six months worth of expenses stashed away should do the trick. If you’re living beyond your means, it may be time to reevaluate your spending and set a budget you can stick with.
2. Continuing to use cards while paying them off
While aggressively paying off your credit cards, it’s best practice to use your debit card or cash, so you don’t end up in a revolving door of debt. 🚪 Many individuals continue to use their credit cards in order to earn points or miles -- this is not a good idea, my friend. You should first learn to use credit responsibly, before trying to beat the system. Try paying down all of your debt, putting yourself on a budget, and (at a later time) slowly reintroducing yourself to credit. Like any lasting relationship, it’s best when done responsibly and with limitations in place.💒
3. Not paying extra toward principal
Some loans allow you to make additional payments and apply them to the loan’s principal balance, which is the amount you owe on a loan not including interest. When you pay extra payments directly on the principal balance, you are lowering the amount that is accumulating interest, which will help you pay off your debt faster. For example, adding an additional monthly payment toward your mortgage principal could drastically cut the amount of interest you pay over the life of the loan.
Bonus: Doing it alone 😢
You don’t have to do it alone! Align yourself with a financial institution that has your back. At MoneyLion, we want to help our members become financially empowered by offering them the tools they need to reach their financial goals.
MoneyLion offers a Zero-Fee Checking Account, 0% APR Instacash cash advances up to $250, a Zero-Fee Managed Investment Account, anytime access to 5.99% APR Credit Builder Loans, and much more. Learn more in the MoneyLion app or at moneylion.com.
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