10 Mistakes That Can Derail Your Debt Payoff

foreign hey guys welcome to this episode of the Rachel Cruz show all right today we're going to talk about 10 mistakes you don't want to make when paying off debt so listen I know there's a lot of Buzz going around right now on like quick and easy ways to pay off your debt and clean up your debt but listen if it sounds too good to be true it probably is whether it's someone on Tick Tock or a commercial you see on TV people are advertising all kinds of things but you seem to know that paying off debt it's never going to be easy okay so if someone is preaching easy to you it's probably not true but the great thing about paying off debt is that it does give you freedom freedom of not owing anyone anything and that is so so worth it plus your debt payoff doesn't have to take forever or be very complicated especially if you're using what we call the debt snowball it's a very simple way to understand how to pay off debt yes it's a marathon it's a journey but on average people are doing an 18 to 24 months paying off all of their debt but their house so in order for you to have this focused progress I want you to steer clear of making these 10 common mistakes all right the first Common mistake when it comes to paying off debt is debt consolidation listen this is basically getting a loan that combines all of your debts into one single payment now I know that may seem like oh my gosh that kind of sounds like a good idea because if I have a lower interest rate or maybe I can't keep up with everything and so it puts it all together in one but actually statistically it increases the lifespan of your loans meaning you're going to be in debt longer so here's the deal getting out of debt it is not a math problem about like getting a lower interest rate or doing this or that that it is about Behavior change and when you pay off that smallest debt which is what we teach paying it off first and actually having them divided up and knocking them out helps the progress because you are understanding and feeling and experiencing all of those wins the next mistake is to avoid a debt settlement so this is how it works companies out there will be like hey pay us a lot of money and we can settle your debt for you and negotiate with the creditors and all this and it's gonna be great but most the time they don't end up doing the work and they take your money and you're done like like it sucks this is this is some of the worst companies out there so listen you're the one that can pay off your debt you don't need to hire a company to do it for you or to promise that they're going to settle your debt office no you can do it now you can do debt settlement especially if you go into collections a lot of people do this with medical debt so you yourself can actually go and settle sometimes Pennies on the dollar depending on what the loan is and when it was but you don't have to pay a company to do that you can do that all right next up our 401K loans oh you guys never borrow money from your 401k never and people will do this to pay off their debt they take money from their borrow from the 401k and pay off their debt listen you can get hit with tons of penalties tons of fees and taxes when you withdraw that money and here's the deal if you leave your job if you quit if you get fired you have to pay it back and the IRS says that you have to pay it back by tax day like on April 15th the next year you have to have all of that loan all that cash so it is a huge risk don't do it plus you want your money in your 401k to be building on itself and actually making money instead of taking it out and borrowing from it all right another huge mistake people make when paying off their debt is they pay off the highest interest rate first now again like I said earlier paying off debt isn't about math if we were doing math yeah that does make sense I get that get rid of the highest interest rate first but that's not the problem math isn't the issue with debt getting out of debt and actually knowing that you have hope to live a debt-free life and to actually work your way out of debt that's the key and by doing that is by using the debt snowball if we talked about earlier where you list out all of your debts from smallest amount to largest amount regardless of the interest rate pay minimum payments on everything and you pay off that smallest one first that is the debt snowball and that is the best most efficient way to pay off debt versus the highest interest rate first the next mistake that I hear a lot of people make is getting a HELOC a home equity line of credit to use to pay off their debt but here's the problem is you're borrowing money you're going into debt basically because you're taking Equity from your house and borrowing against your house to go and put towards other debt and it's just not a smart idea we're not going to go get out of debt by going into debt over here so not good Nixa and here's the deal too when you borrow against your house you're you're risking your house that if you can't pay the loan on time no bueno no bueno all right before we move on to the next mistake I want to tell you about one of our sponsors living on less isn't easy especially in this economy but there is a solution to Rising health care costs it's Christian Healthcare Ministries America's longest serving Health cost sharing Ministry they've helped hundreds of thousands of people with billions in eligible medical bills so to learn more go to chministries.org Rachel all right the next mistake that keeps coming up when you're paying off your debts it's pretty simple people don't change their lifestyle they just stay where they are they make no other changes so listen if you want to get out of debt you have to change up what you've been doing as Dave Ramsey always says you can wander your way in today but you cannot wander your way out you have to really really sacrifice you guys this is where you're gonna see a lot of movement so if you've been living the life you've always been living and then trying to get on debt on top of that the margin that you have or may not have right now is the only thing extra going towards your debt but if you cut your lifestyle that's going to give you more money it's going to free up money within the month to throw at your debt to get out of debt that much faster so cutting lifestyle is really important and then also how you make money your income is important too so getting your income up whether that's taking a different job asking for a raise taking on some side hustles anything around there that's going to bring in more money is going to help you get out of debt that much faster another mistake that people make when getting out of debt is that they keep investing Yes you heard me right it is a mistake you're like wait no what you should be investing and getting out of debt but listen I want you out of debt so bad like so so bad that stopping everything else and putting all of your money focused on one goal should be the goal nothing else so people are like funding this and this and over here and here and then putting any extra they have towards their debt stop everything okay and you're gonna pause it I'm not saying to never fund your 401k I want you to get to that very quickly and soon but taking a few years to pause is not going to be detrimental okay because when you get out of debt you're going to free up your income to have even more to invest so not only you're gonna have peace of mind by not owing anyone anything but drugs can have more income to use to invest and make up that money so once you're out of debt then you can invest 15 of your income into retirement which will include your 401k all right this next mistake May kind of sound strange but it is a mistake the mistake is that people stop giving when paying off debts giving needs to be a part of your financial Journey regardless of where you're at you guys and I always tell people give a little until you can give a lot giving does something to you even in this process okay so living with an open hand creates this habit within you that when you're out of debt and you build wealth and you start winning with money that habit is just going to extend so I get where it's counterintuitive or like I'm trying to take as much money as possible to get out of debt when I'm giving that's not going towards my debt but the character of who you are is is the process as well okay and so I don't want you to miss out on that giving not just for you and for the other people but again it does something to your heart into your soul when you give all right you guys this mistake is a no-brainer but I've got to say it credit card balance transfers so this is again where your credit cards you you go and transfer all your credit card debt to a lower interest rate credit card so moving your debt around it's not going to do anything okay so sure mathematically I understand you're like yeah it's the lower interest rate and if you do that like it's not like it's not going to keep you from getting out of debt but I don't want you to think these things are a solution okay the solution is you you're the one that's going to be able to do it which leads me into the last mistake his waiting on someone else to pay off your debt oh yeah I hear you student loan forgiveness I hear you so listen waiting around and letting other people especially people in DC to clean up you know your your situation and your money and your debt it's you're gonna be waiting a really long time you're gonna be waiting a really long time now can all that go through and can it help you if you apply for it and all of it yeah absolutely so it's not a moral thing um but the other part is like listen you can do it and I would not wait around because we don't know we don't know what's gonna happen we don't know if people are gonna actually pay off the debt for you we don't know but what we do know is that you can do it that's what we know is that you can do it when you have that belief in yourself and you actually know and start making progress towards paying it off it's like oh you put the destiny back in your hands versus someone else so there's something powerful about being proactive and taking initiative and saying I'm going to deal with this myself because it puts you in control of your life versus someone else now you can avoid at making all of these mistakes while paying off your debt but without the right plan it can be hard to make progress and even harder to get yourself from going back into debt so with Financial Peace University you're going to learn the proven plan to getting out of debt and this is a course that has helped millions of people take control of their money and say goodbye to debt for good and so it's an incredible course to go through it gives you the road map basically of how to deal with your money and it gives you the road map to debt Freedom which again can be tough and sometimes it's just that encouragement you need to say hey I can do this so to check out Financial abuse university make sure to click the link in the description all right if you have a friend who is paying off debt make sure to send them this video to encourage them and to show them the right way to do it that is fastest and most efficient and remember you guys to take control of your money and create a life you love

Channel: Rachel Cruze

Views: 288,948

Keywords: the rachel cruze show, the rachel cruze show youtube, money, budget, how to save money, budgeting, personal finance, rachel cruze, save money, how to budget, debt, saving money, save, how to make money, ramsey, finance, how to get out of debt, debt free, 10 Mistakes That Can Derail Your Debt Payoff

Id: LXW_dVbJ-W8

Length: 11min 8sec (668 seconds)

Published: Mon Dec 19 2022