Paying Off Debt Fast? Avoid These 9 Mistakes

9 Mistakes to Avoid When Paying Off Debt Fast

Paying off debt fast can be an effective way to improve your finances, but there are debt payoff mistakes to avoid along the way. Paying off debt fast is good, but you don’t want to make these 9 mistakes while doing so.

1. Not Following a Debt Payoff Plan

Making a plan to get out of debt can focus your efforts, so each extra payment makes maximum progress. Two of the most popular debt payoff plans are: - Debt snowball - Debt avalanche

2. Paying Off Low-Interest Debt First

Making extra payments on low-interest debt inches you closer to the ultimate goal of debt freedom. But, making extra payments on accounts with a higher interest rate first can reduce your total interest charges. As a result of emphasizing high-interest debt, you have more money in your pocket once you pay off the balance.

3. Not Building an Emergency Fund

Nobody knows when one of these events might happen: - Take an unplanned trip to the hospital - Repair a broken HVAC system - Take the daily commuter vehicle to the repair shop - Lose your job or have a reduced work schedule After you have a well-stocked emergency fund, you can dedicate your savings to paying off debt. Then, if a surprise bill occurs, you can skip the extra payments until you replenish your emergency fund.

4. Not Reducing Lifestyle Expenses

Setting the world record for paying off your debt in the shortest time doesn’t require most people to live like a cash-strapped college student. But you should look for places to reduce your daily expenses to find more cash for extra payments and save for other expenses. Some of these cuts can be temporary. For example, you might go down to one streaming service instead of having three.

5. Forsaking Other Financial Goals

It’s important to make extra debt payments when practical, but you should continue saving for upcoming expenses that may require borrowing money. Instead of only applying your extra income to paying down your debt, consider setting aside some money for life’s inevitable expenses.-

6. Not Investing Enough

Another reason to consider paying off low-interest debt slowly is to invest more money. Low-interest-rate debt can mean you save less than you can earn by investing. For example, many people invest more instead of making extra house payments.

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