A debt consolidation program usually takes some time to complete. It is not something that happens overnight. You may have started with so much enthusiasm and motivation, but a lot can happen before you reach the end of the program. If you do not handle things properly, you might end up failing to finish what you started.
Staying motivated in completing a debt consolidation plan may seem like a simple task. And the truth is, it should really not be too hard to do – as long as you are implementing the right financial habits.
You have to realize that your debts are a result of your habits. Even if it was caused by an unexpected event or a series of unfortunate issues, it all boils down to your financial habits. This is why if you really want to solve your debt situation, you need to make some changes about how you handle your money.
Stop these habits during a debt consolidation program
There are certain habits that you should stop doing if you are intent on making your debt consolidation program go more smoothly. These habits, if you are not careful, might end up compromising your financial progress.
Here are the things that you should not do while in the middle of a debt relief program.
Keep using your credit card recklessly
Take note of the word recklessly. Ideally, it will serve you best if you stop using your credit cards while you still have a lot of payments to make on your debt consolidation program. Think of it as trying to empty a pail of water with the faucet on. You will never be successful unless you close the faucet. The same is true with credit card use. But with society consistently moving towards a cashless society, it is expected that credit cards will continue to be used.
What you can do is to use a credit card but make sure you set a limit to it. Budget your credit card expenses so you can pay the purchase in full when the billing statement comes. That way, you will not be incurring any more debt. If you cannot afford to pay something in cash, do not proceed with the purchase.
Open new credit accounts
It is acceptable to keep using your credit cards as long as you can pay it in full when you get the billing statement. However, opening a new credit account is not. As long as you are still in the midst of a debt consolidation program you need to postpone any plans to borrow more money. Even if this is for a mortgage or a business loan, you might want to delay it until you have paid at least a significant amount of your debts – if not all. While waiting, you can start rebuilding your credit score. That will help you get a low-interest rate on future loans.
Another habit that you should let go is spending your money irresponsibly. While you are completing your debt consolidation program, you have to keep a close eye on your spending. According to reports, Americans are spending at least $18,000 on unnecessary expenses. These expenses include eating out, streaming services, subscriptions, etc. These are expenses that you can live without. You need to make sure that you prioritize what is important. At this point, your debt payments are more important than the convenience that eating outside would bring. You need to make sacrifices if you want to improve your financial situation.
Going without a plan
Even if you already have a debt consolidation program, it is still important for you to have a debt repayment plan. This is a plan that you should also align with your budget. It will help you identify the progress that you have made as you try to get out of debt. It will also guide you and serve as your motivation in completing the debt relief strategy that you have chosen.
Ignoring the need to increase your income
The more income you earn, the higher the amount you can put towards your debt payments. If you can pay more towards your debts on a monthly basis, you will get out of debt faster. Some people might feel like it is more stressful to add to their workload. Well, there are options that you can do to increase your income without putting in too much effort. This is called a passive income. It means you will only invest your time, effort, and money at the beginning and then it will keep on earning income for a long time. One example is taking beautiful photos and uploading them to sell as stock images. Every time someone downloads it, you will get paid for it.
If you can capitalize on a hobby as a second source of income, that is also something that will help increase your income. Since it involves something that you love, it should not feel like work.
Habits that will make a debt consolidation program effective
Apart from the list of things that you should not do, there are also habits that you need to apply in your life to make it easier to be successful at your debt consolidation program.
Budgeting is the most basic and important financial tool that will help you manage your finances properly. Whether you have debts or not, you need to have a working budget plan. This is the tool that will help you identify your income and the different expenses that you pay for on a monthly basis. That means this is the plan that will ensure that your debt payments are always funded. Through this plan, you can determine if your income can cover your monthly expenses. If not, you will know that you need to make changes to make sure you are not overspending.
Another habit that you should implement is smart spending. Sometimes, it is not about how much you are earning. It is more important for you to learn how to spend your money wisely. If you develop smart spending habits, you can correct any overspending habits can threaten your consolidation efforts. You will prioritize where your money should go.
The last financial habit that you should apply in your life is setting goals. When you have goals, every financial decision is done with a purpose. You know what direction you want your finances to take and that will give you an idea on what you should choose among your options. This will make it easier for you to set priorities even as you try to complete your debt consolidation program.