I asked 5 experts, and the answers rarely have to do with money.
6 min read
The opinions expressed by employees are personal.
For more than two decades, I have been a public accountant and financial advisor. I have founded companies that have literally helped millions of Americans get out of debt. I have been interviewed by The New York Times and FOX Business, and I have written two books on how to eliminate debt.
However, I must strive every time I am asked this simple question: “What is the biggest mistake about paying the debt?”
Ask me to describe the differences between an income-sensitive federal student loan repayment program and an income contingent student loan repayment program, and I will do so in minutes and in simple language. Ask me for advice to increase your credit score or if you are a good candidate for a debt management program, and I will only need a few more minutes.
As you read them, you may be surprised to see how much psychology has to do with the problem: our biggest mistake could be not to be doing something wrong, but rather, to be thinking the wrong thing.
1. Grace Taylor in Gracefully Expat
“The biggest mistake I see people make when they pay their debts is to get overwhelmed and let that stop them from moving forward,” said Grace Taylor, whose blog and courses are at Gracefully Expat. This is what it says:
As a tax professional, I see people's finances from a very high level, but whether it's quarterly estimated tax payments, student loan debts or, worse, credit card debts with high interest, the worst What someone can do is nothing.
What should he do? “Making a plan and following it is always the best approach,” she said. “And very often, talking about your options with a neutral third party can help you set priorities. So, whether you decide to pay your smallest debt first, or concentrate on crushing your interest debt, any plan that moves you forward is a good plan. And he will begin to see what the results of his arduous accumulated work are, and will increase his successes as time goes by, ”he concluded.
2. CJ in CJ the Money Guru
Doing nothing comes in many flavors.
“Some people don't take advantage of their employer's contribution to their 401 (k) retirement account,” said CJ of the CJ the Money Guru blog. “Instead, you should first put enough in your 401 (k) to get the most out of your employer's contribution. In many cases, this is a 100% return, and it is much better than the return you get, if you pay even the most expensive debt. They also give up a wide range of other solid money movements to pay off the debt: establish an emergency fund, save for future purchases (such as a car) so they don't have to borrow again, and so on, ”he explained.
3. Todd Tresidder in Financial Mentor
“The number 1 mistake people make to get out of debt is that they treat the symptoms instead of solving the problem. It's like trying to cure a cold by blowing your nose, ”said Todd Tresidder, an investment and finance advisor, who also offers free advice at Financial Mentor.
Tresidder insists: “Your debt is the result of excess expenses, or insufficient regular planning. Until he develops new habits of life, that solve those two problems so that they never happen again, his debt will simply return, as soon as he has paid it. ”
He continues: “That is why all the advice on balance transfers, negotiation of your debt to reduce it and any other response that does not solve the fundamental problem will never be a permanent solution. Your lifestyle habits are the cause. Your money is just the symptom. ”
4. Ryan Inman at Financial Residency
Ryan Inman is a financial advisor who specializes in helping doctors at his Financial Residency site (his wife is a pediatric pulmonologist).
“The biggest mistake people make when paying a debt is not facing it directly,” and confirms that the emotional is as important as finance.
“It is very difficult to get serious and face your debt, as it often causes many emotions, such as shame, or the feeling of being overwhelmed. Know that it is ok. It will be a challenging journey, but once you are on the other side, you will gain confidence to continue to positively affect your financial life, ”he concluded.
5. Logan Allec in Money Done Right
A step above doing nothing is to do the least. Logan Allec in Money Done Right echoes what could really be the biggest problem of all, despite my initial hesitation:
The biggest mistake people make when paying their debts is to make the minimum payments of their debts. If someone only makes the minimum payments, it can take them literally decades to pay the total balance. This is because many times the minimum payment of a debt barely covers interest and very little of the payment goes to capital, that is, the payment of the debt itself. Pay only the minimum payment that the creditor says you must pay, put all the power in your hands, and remember, they are in the business of squeezing all the money possible!
Conclusion: In a strange way, doing nothing is preferable to doing the least. Why? Because the minimum payments delay the inevitable decision to do something with your debt, which you should eventually take. The longer it takes, the more the debt accumulates.