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11 Mistakes to Avoid When Paying Off Debt

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There are three truths to debt:

  1. Getting into it can be fun.
  2. Getting out of it is not.
  3. It’s worth that effort.

That’s because being in debt is like living under a dark cloud. Getting out from under debt can be life changing. Millions of people have done it, so why not join them?

But know that it means more than paying off credit cards. It means changing your spending habits, learning how to budget, tracking your expenses, prioritizing debts, creating emergency and retirement funds, and knowing where to find help.

It’s a detailed process, and it’s easy to make mistakes along the way. Here are some of the major ones you’ll want to avoid.

Mistake 1: Not changing your spending habits.

Is your purse or wallet on autopilot? Do you hit Starbucks every morning? Go grocery shopping without a list? Feel an irresistible urge to buy the newest iPhone? Pick up dinner at Applebee’s on the way home from work?

Such routines make your life comfortable, convenient and cool. They also allow money to needlessly leak from your bank account.

Remedy: Get off autopilot. Consider how much you could save by altering your routine.

  • Find cheaper alternatives. Spending $4.95 a day for a Caffe Mocha? That’s $99 a month if you always stop on the way to work.
  • Make a shopping list before going to the grocery store and stick to it.
  • Try to survive without the latest iPhone and three or four streaming services.
  • Eat in more often.

The overspending examples are just symptoms. To root out the problem, think about what you were thinking about when you bought those things.

The answer is probably “nothing.” You were on autopilot. Turn that off, track your spending and turn on the savings.

Mistake 2: Trying to dig out of debt alone.

It can be done, but it can also be more easily done. All you need is a little help, though asking for help indicates you have a problem. Some people don’t want friends or relatives to know that.

Remedy: Get free and confidential help. It’s available at nonprofit credit counseling agencies, which are staffed by trained and certified counselors.

They can suggest debt-relief solutions like debt management programs, credit consolidation, debt settlement or even bankruptcy if your financial ills need strong medicine. Counselors can also formulate a budget and help you learn how to stay out of debt for good.

Mistake 3: Signing up for an Illegitimate Debt Relief Program.

Debt relief programs can get out of your financial hole. Just remember that digging is work. If a program seems too easy to be true, it probably is.

Remedy: Don’t believe in debt relief magic. Debt relief scammers will make unrealistic promises and charge excessive fees. So, how do you choose a good debt relief company? Check them out through the Consumer Financial Protection Bureau, Better Business Bureau or local state attorney’s office. If you’re looking for recommendations, credit unions, universities and military organizations should be helpful.

Keep in mind that there is no quick fix. Debt-relief programs typically take 3-5 years, so be patient. Also, be willing to dig yourself out. If an agency says you won’t need to, it’s shoveling malarkey.

Mistake 4: Not creating a practical budget.

At the risk of overstating things, getting out of debt is like going to war. If you try to wing it, you’ll probably end up waving the white flag.

Remedy: Come up with a realistic battle plan. It will address necessities like housing, food, transportation, health care, insurance and education.  It will also create room for you to pay down your debt.

A good place to start is by getting rid of your credit cards. We’ll pause now to let Visa addicts finish their seizures. You’ll think twice if you have to pay cash for things like dining out, movies, leather boots and electronic gizmos.

Mistake 5: Trying to pay off multiple debts at once.

There are bills you must pay each month, like mortgages, auto loans, utilities. Then there are bills you can pay a portion of, like credit cards. People often try to address each of those each month. Bad move.

Remedy: Pay the most expensive one off first. That’s the bill with the highest interest rate. It makes more mathematical sense to pay $100 toward a debt with 18% interest, than $50 toward that debt and $50 toward a debt with a 6% interest rate. Take care of the higher-interest debt first, then work your way down.

Mistake 6: Closing accounts when they are paid off.

Once you’ve finally paid off a credit card, two urges hit. You want to celebrate, and you want to close the account – bury that sucker once and for all.

Follow through with the first urge. The second one will actually hamper your financial recovery.

Remedy: Don’t close the account. It sounds counterintuitive, but it’s best to keep unused credit cards open. Credit scoring models reward consumers for having long-standing credit accounts and for using only a small portion of their credit limit.

Unless the card has a ridiculous annual fee, keep it. Just don’t use it.

Mistake 7: Borrowing from or ending contributions to a 401(k).

A lot of people have one chunk of money they could use to pay off debt – their retirement fund. That’s one way to attack the problem, but you have to think long-term and ask yourself, “Do I really want to die of old age with a McDonald’s uniform on?”

Remedy: Don’t use your retirement fund or take out a 401(k) loan to pay off today’s debts. First, there are usually stiff financial penalties if you withdraw money early. Second, many companies at least partially match your retirement contributions. That’s free money.

Third, appreciate how retirement income appreciates. The earlier you start contributing, the more time it will have to grow. If possible, put 5% to 10% of your income toward your retirement. If that’s not possible, fine. Just don’t raid your retirement. Your golden years aren’t meant to be spent working at the Golden Arches.

Mistake 8: Not setting aside emergency savings.

About 56% of Americans didn’t have $1,000 in savings to pay for an emergency in January of 2022, according to a Bankrate study. Are you ready if your car breaks down or your roof springs a leak or your dog bites the neighbor and you need a lawyer?

Remedy: Get prepared. You need 3-6 months of expenses in an emergency fund. It may take a while but make that part of your budget. Put 5% of your income toward covering life’s unexpected problems. If nothing else, you’ll probably sleep a lot better.

Mistake 9: Not verifying your credit report is correct.

About 34% of Americans found at least one error on their credit reports, according to a 2021 study by Consumer Reports. You could end up paying for somebody else’s mistake if you don’t report a credit dispute.

Remedy: Check your credit reports. The three major credit reporting bureaus – Equifax, Experian and TransUnion – allow you one free credit report a year. Look for incorrect delinquencies and/or balances that hurt your credit score and make it harder to get a loan.

Mistake 10: Not prioritizing your debt.

Unlike the federal government, average Americans can’t just keep piling up debt as if it will never come crashing back down on them. Due to interest rates, your financial hole is only going to get bigger if you ignore it.

Remedy: Focus on the problem, and the solution. One way to get focused is to take a piece of paper the size of a credit card and write down five debts you want to get rid of. Tape it to your credit card. Every time you reach for that card, you’ll be reminded that you’re adding, not subtracting to the problem.

As for solutions, the simplest is to make a plan, get a budget and stick to it. If you need help, millions of Americans have found relief by consolidating their debts into one monthly payment through a debt management program.

Mistake 11: Not transferring your balance to better credit cards.

Credit cards are not inherently evil. Truth is, they’re quite handy when used properly. Imagine you owe $4,000 on a credit card with a 15.99 interest rate. If you shift that to a card with 0% rate for 18 months and pay $225 a month, you’d save $600 interest.

Remedy: Apply for a balance transfer credit card with a 0% or very low introductory interest rate and transfer your old credit card debt to the new card.

If you can qualify, these cards can provide the breathing room you need to attack your credit card balance. Just remember, it’s an “introductory” rate. When it expires, it will skyrocket. If you don’t pay it off in the allotted time, you could end up in worse shape than you started.

Best Way to Get Out of Debt

Now you know mistakes to avoid. What’s next?

Here are a few steps to take when getting out of debt. Some echo what you’ve already learned, but they are worth driving home.

  • Check your budget – There always are areas where you can shave a few dollars free and create extra cash to apply to the debt? One less night eating out (at least $20 saved). Take your lunch to work every day (at least $20 saved). Watch the movie or sporting event at home (at least $20 saved). Skip Happy Hour ($20 saved).
  • Bury your credit card – That’s what got you in trouble. Keep one in your wallet for bonafide emergencies. Pay for everything else in cash. It’s a LOT more difficult to hand over a $100 bill than it is a credit card. Impulse buying almost disappears when you pay everything with cash.
  • Go shopping with a list – A grocery store or shopping mall is a dangerous place when all you take is a credit card. Make a list of what you want. Only buy what is on the list. Get in, get out. And never go grocery shopping when you’re hungry. Even Spam looks tempting on an empty stomach.
  • Share the cost – Roommates cut the cost of everything in half, maybe more, if they’re really frugal. You spend less on rent, less on food, less on utilities, less on cable and even less on transportation. In most cases, the savings generated by splitting costs will be enough to drastically reduce your debt by itself.
  • Take one more look around the house – Do you really need $100 a month worth of cable TV? Does paying $50-$75 for a round of golf make sense? Can you mow the yard and clean the house yourself? How about exercising without a gym membership? All those things are nice to have … if you’re not in debt. Dump them until you’ve paid off the last of your credit cards.
  • Get some help – If you are still flummoxed by debt, find a nonprofit credit counseling agency online and go through one of their free credit counseling sessions. They help you sort out your problem; they help you set up an affordable budget; and they advise you on which debt-relief option best suits your situation. The counselors are trained and certified. And, best of all, it’s FREE!

How to Pay Off Debt Faster

All that belt-tightening might not sound like fun, but you can accelerate your financial recovery. These steps should also allow you to reward yourself with an occasional night out or round of golf.

  • Generate more income – There were almost 5 million more job openings than available workers in January 2022, according to the Bureau of Labor Statistics. Getting a second job, even if it’s just a few hours a week, can be a pain, but it will be time well spent.
  • Pay all bills on time – You’re just giving away money when you’re late paying monthly bills. Late fees are a gold mine for credit card companies, landlords and banks. They don’t have to do any extra work to collect extra money. Don’t give away your money.
  • Garage sale anyone? – Nearly everyone has old TVs, computers, exercise equipment, furniture and clothes they simply don’t use anymore. Let someone pay you to take away your junk.
  • Unbudgeted income – You may get a tax refund or payment from an estate you never expected. Forget about a weekend vacation. Spend the money on reducing debt.
  • Ask for a rate reduction – If you haven’t looked at the interest rates you’re paying, especially on credit cards, take a look at your statement and find out. If you have been a consistent, on-time payer, your card company will want to retain your business. Tell them they can, if they drop your interest rate to the lowest levels. This is one area where “Ask and ye shall receive,” should actually work.
  • Ask for a raise – Businesses have been flush with money for a while, but the recent tax cuts should make their bottom lines even bigger. Unemployment is at its lowest levels. The combination means it may never be a better time to get a raise. The worst that can happen is you get another “No!”

About The Author

Bill Fay

Bill “No Pay” Fay has lived a meager financial existence his entire life. He started writing/bragging about it in 2012, helping birth into existence as the site’s original “Frugal Man.” Prior to that, he spent more than 30 years covering the high finance world of college and professional sports for major publications, including the Associated Press, New York Times and Sports Illustrated. His interest in sports has waned some, but he is as passionate as ever about not reaching for his wallet. Bill can be reached at [email protected].


  1. Reinicke, C. (2022, January 19) 56% of Americans can’t cover a $1,000 emergency expense with savings. Retrieved from
  2. Gill, L. (2021, June 10) More Than a Third of Volunteers in a Consumer Reports Study Found Errors in Their Credit Reports. Retrieved from
  3. N.A. (2022, March 10) Job Openings and Labor Turnover Summary. Retrieved from