7 Mistakes to Avoid When Trying to Get Out of Debt

Getting into debt is undoubtedly easier than getting out.

We Americans are somewhere around $15 trillion in debt. It sounds like a made-up number, doesn’t it? Sadly, it’s true. Here’s what matters, though: No matter how in debt you are as an individual, there is a way to get out. It may take longer than you wish, and it may be harder than you hope, but it is possible. Once you decide on a debt-reduction method and get started, here are seven mistakes to avoid.

1. Continuing to beat yourself up

As someone who has been deeply in debt and crawled out, I’m here to tell you that beating yourself up for getting into debt is a waste of energy. Looking backward won’t get you where you want to go, and spending energy on guilt and shame won’t leave you with enough strength to live life the way you’re meant to. So, you’re in debt? Chances are, you’ve learned some important lessons along the way. And better yet, you’re adopting new, healthier habits that can help you throughout the rest of your life.

2. Being too proud to ask for help

For some, getting out of debt is a matter of choosing a debt-reduction method and sticking with it. For others, there’s a need to get to the bottom of the issue, to figure out how it happened in the first place. If you feel like you’re floundering, don’t be too proud to ask for help. Organizations like the National Foundation for Credit Counseling can help you get to the heart of your spending issues and come up with an actionable plan for getting out of debt.

3. Caring what anyone else thinks

Let’s say you take the same five-day trip with friends each year, whether you can afford it or not. It’s okay to say no to travel until you’ve got your debt under control. Real friends will support your efforts to improve your financial situation. Those who don’t really do not matter.

4. Tapping retirement

If you have a 401(k) or other retirement investment plan, it can be tempting to take money from that fund to pay down debt. Think twice about doing so. Taking money from retirement not only leads to unnecessary fees but can also impact your future. When you leave money in a retirement account to grow, it earns interest. And then (and this is the magic of compound interest), the interest earned also earns interest. Leaving it to grow uninterrupted is almost always the best choice.

5. Getting so gung-ho that you forget to save for emergencies

As the ongoing global pandemic has illustrated, life takes some odd twists and turns, and things can happen that we never expected. It’s vital you have some money put away to cover emergencies, like a broken-down car or flooded basement. The last thing you want to do as you’re paying off debt is borrow more to cover an emergency. As you determine how much you can put toward debt each month, remember to budget enough to put away into an emergency account. If you never have to touch that account, great.

6. Closing accounts

I was once so angry with myself for charging up a credit card that I paid it off and immediately canceled it. It felt good for approximately 60 seconds. And then I remembered the role "available credit" plays in our credit scores. Essentially, creditors want to see that we have access to all kinds of money that we’re too disciplined to touch. Let’s say you have five credit cards, each with an available balance of $2,000. That’s a total of $10,000 available to you. The lower the balance on those cards, the more you have available. Now, if you cancel one of those cards, your total available credit drops to $8,000, and it doesn’t look quite so good.

If you’re paying an annual fee for a card, get the card paid off and then call the card issuer and ask it to reduce or eliminate the fee. Unless your credit score is so high that you can afford to take a hit, though, do not cancel the card.

Read more: How Much Available Credit Should I Have?

7. Forgetting to reward yourself

We humans are emotional beings (some of us more than others). I’d be lying if I said that paying off debt is fun, but it can be rewarding.

Why not set up a reward system? For example, buy a new video game each time your balances drop by another $1,000. Invite a few friends over for dinner each time the balances drop by $750. Plan an inexpensive weekend trip when a particular credit card is paid in full. In other words, work rewards into your get-out-of-debt plan. You will have earned them.

If you’ve ever quit a job that made you miserable or broken up with someone who was wrong for you, you know how powerful it feels to take control of your life. Paying off debt should be celebrated. As you find that you have more money left over in your bank account each month, you should be celebrated.