When you’re living from payday to payday, identifying the obstacles to paying off your debt is probably the last thing on your mind.
While it may seem that there’s no solution to your debt problem, all you need to do is make some behavioral commitments you can start your debt recovery process right now.
If you don’t take action and commit to overcoming these obstacles, you may just have to live a life under the constant pressure of debt.
10 Obstacles You Need To Overcome To Pay Off Your Debt
You’ll have to make some difficult decisions and significant sacrifices but believe me, paying off your debt will be a liberating and life changing experience – choose a debt free life rather than a depressing life of debt.
1. Not Having a Spending Plan
You need to establish a spending plan (budget) of the absolutely essential monthly bills that you have to pay.
You need to know exactly where your money will be spent before you get it so that you don’t inadvertently pay a non-essential bill at the expense of something more urgent which could cause you additional financial problems.
Proper planning is essential in your quest to overcome your debt.
To do this it’s vital that you commit your spending plan, or budget, to writing on a piece of paper or create a spread sheet so you can see exactly where your money will be spent before you get it.
Learn about money & managing your personal finances to minimise debt and financial risk
2. Buying Non-Essential Items
Cutting out the cost of non-essential items from your spending plan could make a huge dent in your monthly expenditure.
In fact if you really want to overcome your debt this is the one of the most important steps to achieve this if you’re ruthless.
So to make a real difference & give yourself a bit of breathing room from your debt you need to be ruthless and cut out all the non-essential items which could include your DSTV or cable TV subscription.
Your car is a real money sucker so get rid of it if you can use public transport and you’ll realise the following savings
- No monthly car repayments
- No fuel costs
- No maintenance costs
- No unexpected emergency repairs
- No parking costs
…and you may even make some money from selling it.
“When you get in debt you become a slave” – Andrew Jackson
3. Not Saving Anything
Once you’ve established a budget make sure you have an amount that goes into an interest bearing account every month without fail.
The power of compound interest is staggering and at the end of the period you’ll be amazed as to how much your monthly savings have grown.
Here are some money saving tips that could help you accumulate some wealth.
4. No Self Discipline
You need to have a change of mindset and not be tempted to buy that new shiny thing.
Also get rid of the childish mentality of needing instant gratification.
So while many stores are clamouring to give you credit, you need to resist and be sensible knowing that taking out more credit is counterproductive to your objectives of overcoming your debt.
A significant amount of self discipline will also be required to not deviate from your spending plan above by giving in to impulse buying.
Spending behaviour can be habitual, so form healthy money habits to avoid reckless spending
5. Relying On Your Credit Card
You’ll also need to cut up your credit card which is a menace for anyone who is in debt.
The problem with having a credit card is that it tends to get used as a “go to” source for funding or used to get instant gratification for some unnecessary purchase that will only exacerbate your debt situation.
I can’t believe that people think that they can use credit to get themselves out of debt when it actually just worsens their financial situation.
Buying on credit can give you an instant buzz, a dreadful hangover will be imminent.
Not only does a credit card provide massive temptation to make impulse purchases, but it also comes with an extremely high rate of interest which is usually around 20%.
Even Warren Buffett says he wouldn’t borrow money at that sort of interest rate.
6. Not Prioritising Your Creditors
It’s likely that some creditors will be more pressing than others but it’s always a good idea to try & pay off your smaller bills first to give you some sense of achievement.
So if you have a clothing account that offers a quick settlement discount, for example, you should pay it off once & for all and know that you’ll never be getting their demand for payment again.
What this does is save you a bit of money but it also gives you peace of mind as well as a sense of accomplishment knowing that you’re overcoming your debt.
It does however, make sense to pay the high interest creditors first as you aim is to reduce your debt and not allow it to increase with interest mounting up.
7. You Are Addicted To Shopping
Once shopping becomes a fun thing to do, it makes it a hard habit to break.
It could also mean some tough talking especially if it’s a spouse who’s doing the spending & racking up debt on frivolous items.
I know someone who cannot go to the mall without buying something no matter whether they need it or not. It seems to be a compulsion with her.
So if this is you or your spouse you need to find some other activity that doesn’t cost anything like going for a walk with the dog or some friends.
8. Not Having An Emergency Fund
Not having an emergency fund encourages people to borrow money to get through a crisis which could be anything from a medical emergency to an expensive motor vehicle repair.
This clearly just adds to the debt issue without contributing towards reducing it.
In addition to start saving something every month (above) you should also put a small amount away to build up an emergency fund.
Avoid borrowing money from a friend as it’s an option that has ruined many a good friendship.
9. Keep Spoiling the Kids
I know, how can you say no when your kids only want the latest stuff that all the other kids have.
Unfortunately that’s one of the drawbacks of being over indebted, there comes a time when your kids are going to have to go without having the cool stuff.
It’s that or face a long uphill struggle of living a life strangled by debt.
On the other hand if you be the tough guy now, you’ll be able to spoil them in the glorious post debt days.
10. Trying To Keep Up With the Jones’s
Everyone wants to be able to impress their friends & peers by having the latest & greatest things from fancy cars to big houses.
That’s fine for the high rollers who can afford it, but for those who can’t they’ll be exposing themselves to a future of mounting debt, never ending bills and possible litigation resulting in bankruptcy.
It’ll soon catch up with you and the Jones’s & other fancy friends will have left you behind to sort out your financial mess.
The end result is that the very people you were trying to impress would’ve had a good laugh at your attempts to keep up with their lifestyle and you would’ve just caused yourself a whole heap of debt misery.
It’s a good idea not to hang out with the wrong crowd or people who are pretentious & materialistic, rather have friends who accept you for who you are and not how wealthy you may pretend to be.
Last Word On Overcoming Your Debt
In conclusion, taking real steps to overcome your debt problems is not easy but it is absolutely necessary unless you’re resigned to living a life of debt.
If you don’t start today the chances are you’ll never start and your debt will end up sucking the life out of you.
On the other hand hauling yourself out of the downward debt spiral will be an uplifting and massively rewarding experience.
So stop complaining about drowning in debt and start taking action to overcome it.