The Wrong Way to Pay Off Debt

I am the last person to dish out financial advice. By age 13, I successfully emptied an entire checking account after securing money from my Bat Mitzvah savings. I went through life ignoring pieces of mail from the bank and just crossing my fingers for a positive number in my account, and I still get the sweats when my rent is due every month. While I am extremely fortunate to not carry crippling debts into my adult life like millions of others do, the fear of accruing debt is still a reality. Maybe you find yourself going through life in a naive bliss like I did, but tackling debt the RIGHT way, large or small, credit or student loans, is the most responsible action you can take throughout every stage in life.

If you don’t find yourself trading bonds on the regular or consider yourself financially illiterate, take these warnings as a gentle nudge on how to NOT pay off your debt.

Borrowing from Family:

While mom and dad are always the first line of defense in my house, becoming a fully functioning adult means tackling your problems yourself even when it comes to your bank account. When I find myself budgeting for monthly rent or big investments today, I still go back into little me mode, dialing up my dad and asking permission to do something. First step to managing your own money is to cut the cord with the parents. Borrowing from any family member sets you up to be financially dependent for the long road and even putting the one’s you love most in an uncomfortable and risky position. If family members are your only resort to paying off a massive debt, make sure conditions are made clear and in writing. Try to propose a time frame and schedule of paying back your family and offer interest on your given loan. Establishing boundaries and conditions on your financial assistance shows your family this isn’t a handout, but rather a short-term aid.

Playing hide and go seek with your debts:

I am a veteran ‘hide and go seek’ player with money.  While I would never hide a bill payment, shoving unopened bank statements or monthly reviews of my credit card use was a constant feature to my apartment desk drawers. The out of sight out of mind mentality is one of the worst habits you can have when managing money or paying off debts. Pretending a problem doesn’t exist is not only unrealistic but a major problem that follows you down the road. Dodging calls from creditors will leave you facing your demons head on and frequently. While you might ‘forget’ a payment, creditors don’t and never will. Make sure your financial status is well on display at home, have your monthly statements opened and in an area where you will see them frequently. Keep on top of your payments with a calendar on the fridge or at your desk (preferably not in the drawer). Opt for notifications on your smartphone or computer if you don’t tend to be a fan of paper statements, that way before posting a picture of your plate on Instagram, you can see if you can actually afford that bottomless brunch.

Charge it to credit!

No. Flat out, no. Pushing your debt around to a credit card defeats the very purpose of tackling debt. Similarly to playing hide and seek, moving around money works when you HAVE more of it, not when you are avoiding the lack of it. Putting massive debt from a student loan onto a credit card will hurt your chances at being able to first pay off that credit card or even apply for more credit down the road. Bad credit can mean big problems for adult life like buying a new car, putting down a deposit for your first home, setting up a mortgage or even applying for loans in the future. Bad credit and whopping credit card debt is like that bad taste in your mouth, it won’t truly go away until you find something more permanent and satisfying.

A little bit goes a long way:

This might appear to be the financially responsible way to tackle large or small debts, but buying into that ‘minimum payment’ every month can be a big tease. Chopping a little bit of debt off your block every month is a smart habit to utilize, but paying just the bare minimum is a surefire way to extend your debt. Not only is it the slowest way to get out debt, but it’s the most expensive way. You will find yourself  paying much more interest at a slower rate of time, leaving you with a chunk of change that just won’t go away and headache to match. Get aggressive with your debt and allot more money to pay off any lingering obligations faster.  Just like ripping the Band-Aid off, it may seem a little scary and potentially painful at first, but taking off the weight of debt sooner than later will leave you unharmed down the road.

Need more money advice? Create healthy saving habits here.

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