6 Common Mistakes To Avoid When Paying off Debt

piggy bank with band-aids and man behind him

Finally eliminating burdensome credit card debt you have been carrying can be life-changing. The first change, of course, is the tremendous relief you will feel. No longer are you trapped, spending a portion of your income each month to pay for purchases you made months, even years ago. (In other words: the least satisfying purchases ever!)

The next life-changing aspect to coming out from under debt is freedom: freedom to set new financial priorities, to save for the future, to increase your financial security with an emergency fund, save for retirement and, well, simply enjoy all that money affords you. No more will you have to feel guilt each time you buy something. Instead, you can create a well-crafted budget that covers all your expenses — and then the rest of the money is yours to save and spend.

But to achieve this freedom, you do have to make a commitment to change your spending habits for good, and dig deep to pay off your existing debt balances. But there are some common mistakes people make when paying off debt that can keep them from reaching their goals as quickly as possible. Here we’ll review six very common mistakes — and tell you how to avoid them.

Mistake #1: Not Creating a Budget

Reducing debt requires you to reallocate current income towards high-interest balances — as much as you possibly can. And a clear budget helps you track spending patterns and find money you can carve out to direct toward this crucial financial goal.

The true benefit of a budget is it allows you to see clearly what expenses are baked into your monthly spend — and then you can see how much income you are spending on low-value expenses that don’t forward your financial stability. To start a budget, take inventory of fixed expenses such as housing, utilities, car, and insurance payments. Then note all your minimum debt payments along with the money needed for food and household basics. Next, list out all the “extras” (and yes, cable TV or streaming services is an extra) and get out your red pen to mark off all you can set aside and stop spending on until you are back on track.

Mistake #2: Not Changing Your Spending Habits

Here is a simple truism: you can not pay off debt without making some sacrifices.

The first sacrifice is to put away all your plastic money. Instead, resolve to use cash or your banking/debit card for all your necessary purchases. This serves two goals: (1) it literally keeps you from adding to your debt load; and (2) it retrains your brain, reminding it that every single purchase is a cash purchase. Just this simple switch will put you on a path toward success.

The second step we addressed above in “Creating a Budget” but it bears repeating, since it is such a crucial part of succeeding at paying off debt. You must look at your spending habits with a critical eye in order to find easy ways to cut down your monthly spend. These are short-term trade-offs that support the ultimate goal of becoming financially free. So Instead of buying breakfast on your way to work, make it at home. Cut down the number of cable channels and streaming services you have to the bare minimum. Look at any and all monthly membership fees you pay — gym membership, meal delivery services, professional networks, etc. — and cancel as many as you can. The more you cancel, the more quickly you will be able to rejoin some of them. In many cases, making small adjustments to your budget can free up several hundred dollars a month to use for paying down your debt. If your debt burden is severe, you might want to consider options like becoming a single-car household or reducing the number of cell phones you are paying monthly bills for.

But of course you simply can’t eliminate all entertainment and fun — if you do, you’ll be less likely to stick to your program. Include some planned fun in the budget: one movie night a month, meeting friends for a drink instead of going out to dinner (or even better – invite them over), indulge in all the free activities you love, whether that’s hiking or cycling or reading the latest thriller (this is what libraries were made for!). Making plans is what makes it possible to say no to impromptu spending — and that can make all the difference between successful debt reduction and failure.

Mistake #3: Trying to Pay Off Too Much At Once

When you have a large amount of debt, it’s easy to get overwhelmed: different interest rates, different balances, different pay dates. Simplify if you can, and make a constructive plan. Consider consolidating your debts with a debt consolidation loan so you have a single payment, potentially one with a lower interest rate. Or prioritize paying off your highest-interest debt first, rather than paying a little extra each month on all your cards. Do whatever you need to do to make your debt feel manageable, and then make a payment plan and stick to it.

Mistake #4: Not Contributing to Retirement Accounts

Not saving for your future will hurt your long-term financial stability. Though it may be tempting to take all those dollars and direct them toward paying off your debt, remember that time is the greatest power when it comes to retirement savings. Letting funds grow and accrue interest is a surefire long-term win.

Mistake #5: Not Maintaining an Emergency Fund

Failing to have emergency savings can lead to charging unexpected expenses, sabotaging efforts to get out of debt. You could pay down $500 and then have an unexpected bill of $600 wipe out months’ worth of effort. Saving even 3 to 5% of your paycheck will give you a cushion when the car breaks down or an AC needs to be replaced. More than half of all Americans do not have an additional $500 in a savings account that can be used to cover an emergency expense. Don’t let that person be you. Set aside a small amount from your paycheck each pay period — even as little as $10 — to easily give yourself that little cushion. And most banks have a function by which you can automate that deduction, giving you one less money task to think about while also providing a little safety net.

Mistake #6: Not Making a Plan

The number-one biggest mistake in paying off debt is not making a concrete plan, with a schedule and timeline and a clear horizon. Remember: credit card companies hold all the cards when it comes to credit card debt. It’s not their job to make it easy to repay what you have spent. And it is very easy to just keep paying minimums and think you will eventually “get there.”

But for most people who carry significant credit card debt, that simply isn’t true. The average American would take more than 20 years to pay off their debt paying just monthly minimums. And worse? They will end up paying more in interest than they paid for the original items they purchased, which by now are just a memory.

So if you’re reading this article now, commit to making a plan. And start today.

Check out Debt Consolidation Options to learn more about how to tackle your debt.


At Patriot Funding, we believe you are more than your credit score — and we are ready to work with you to free you from high-interest credit card debt.

Stop juggling competing bills and end the cycle of paying minimums that gets you nowhere. Instead, consolidate your debts and pay one single bill monthly, at a lower interest rate.