Still Paying Down Debt? Maybe You'€™re Doing It Wrong
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4. You’re not applying extra payments to the principal only.

A great way to expedite your debt payment process is to pay more on your loans than the minimum. However, if you don’t specify that you want the extra cash to be applied to your principal, it’s very likely it’ll go toward interest and you won’t get as much benefit from your good deed.

Use this handy sample letter from the Consumer Financial Protection Bureau as inspiration to thoroughly explain your wishes to your lenders.

5. You’re paying off debt before you have an “Oh no!” fund.

There’s an order of operations to getting your financial act together. Before you start paying more than the minimums on your debt, it’s imperative to create a baby-sized “Oh no!” fund of about $1,000 to cover you in case of an emergency.

Why $1,000? That’s typically enough to cover an insurance deductible and prevent a small inconvenience from becoming a catastrophe. Skipping this step can mean racking up even more debt in order to finance new car tires, a replacement refrigerator or even an emergency root canal. (Note: Many financial advisors recommend you ultimately aim for about three to six months worth of expenses in a saving account.)

6. You don’t think you’re in debt just because it’s 0 percent financing.

Try making a late payment on your 0-percent-interest furniture or balance-transfer card, and see what happens. That company that gave you such a good deal will turn into an ankle-biting Chihuahua, back-charging you at, say, a nice 22 percent interest rate.

Zero percent is rarely ever 0-percent forever, and there are a lot of strict guidelines in order to keep that rate. But most importantly, it’s still debt. Treat it that way.

7. You pay off debt so that you can get back into debt.

If I had a nickel for every time I heard someone say, “I’m trying to pay off my credit card so I can finance a car,” I’d be giving Warren Buffet a run for his money. This mentality is so detrimental because it means you’ve officially accepted debt as a part of your life. Talk about stressful!

Break through the ingrained mindset that you’re just earning money in order to make more payments. It’s not easy, but the peace of mind you’ll gain is worth it.

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