5 Things Not to Do When You Are in Debt


Being in debt is one of the most stressful situations anyone can get into. Sleep can be hard to come by and life can become a bit of a nightmare when you owe more money than you can afford to pay back.

The following are some of the things you need to avoid doing if you find yourself in this position.

Bury Your Head in the Sand

Ignoring a financial problem is one sure fire way of making it worse. In some cases it might be that all it takes is a slight adjustment to your lifestyle in order to get things back on track. For example, it could be that you spend a little more than you earn every single month or that the repayment dates for your loans are at the wrong time of month. No one ever dug themselves out of a debt hole by burying their head in the sand. This is a time when you need to take control of your finances and work out how you are going to turn the situation around. After all, no one else is going to do it for you if you don’t.

Keep Paying the Minimum Amount on Your Credit Card Each Month

If you have credit card debt the simplest idea probably seems to be paying the minimum amount each month. Maybe you think that if you do this the day will eventually come when you can pay off the whole shooting match. The problem is that if you only pay the minimum repayment then all you are doing is paying the interest, so the capital amount only reduces by a minimal amount if at all.

Live Like a Monk for 28 Days of the Year

Ok, so you decide to turn over a new leaf and spend less. This is a great idea but how will you do it? If you plan to live like a monk for 28 days of the month then you probably won’t get great results. This is because by the end of the month you will be fed up and will want to live like a king for the remaining two days. If you need to make changes to your lifestyle then it is best to do this bit by bit and in a controlled way. It is best to spend a little less each month and feel good about it than feel resentful about spending next to nothing. Start with one aspect of your life which needs to be fixed and then you can look at another aspect next month.

Keep Borrowing Off Friends

In cases of emergency it can be reassuring to have friends and family members to borrow from. The problem is that this sort of borrowing isn’t a great idea on an ongoing basis. It can lead to bad feelings in the end and might end up with you losing a good friend because of it. Also, it can be easy to forget about these loans and not realize just how much you owe.

Consolidate without Considering It Fully

Getting a consolidation loan can be a good idea but not all consolidation loans are right for everyone. You might be paying less each month but are you paying more interest or will it take you a lot longer to pay the full amount off? Any solution you come up with or are offered has to meet your long term goals and has to be carefully considered. This means taking the time to consider what is in front of you and how it will affect your finances both now and in the future.

What advice would you give to someone in debt?

16 Responses to 5 Things Not to Do When You Are in Debt

  1. FI Journey says:

    3 words describe debt to me– Hair. On. Fire.

  2. Phew! We’re not making any of those mistakes 🙂 Thankfully we are well on our way to paying back $130K in student loans. We had a pretty frugal lifestyle to begin with so we’re used to living like monks, I guess 🙂

  3. Ryan @ impersonal finance says:

    Great post! It’s always difficult to see friends and family who want to change their ways and get out of debt, but they don’t come up with a plan for doing it. They always just think it will happen, and get disappointed when it doesn’t. They can’t seem to separate the needs from the wants. Maybe instead of thinking in terms of what they should do, they should think about what they shouldn’t do. I might suggest this to all those I know who don’t have any idea where to begin. Great idea!

  4. In my opinion, for most people most of the time, a Debt Management Plan is a better way to genuinely attack debt than a consolidation loan.

    • Robert Bell says:

      Thanks for that Kurt. Too many people seem to sign up too quickly for consolidation loans without fully considering them first

  5. One piece of advice I’d give to people that are in debt is to be ready to make changes. You cannot succeed in getting your finances back on track until you consciously are ready to make changes. Anyone can say they want to get out of debt, but if you don’t actually change your spending habits it’ll never happen.

  6. I definitely second what Brock said above me. You have to be ready to change. I wasn’t ready yet, and I got nowhere. I now have a new motivation to really do it, and will get there!

  7. Those first three are biggies! Especially when you try to save and fix your debt problem by depriving yourself to the point where you’re miserable 90% of the time, until you snap that 10% and go spending crazy to make up for the lean times. It’s like a diet – if you completely deprive yourself, you’ll never be able to stick to it. It’s just not reasonable or realistic.

    • Robert Bell says:

      That’s exactly what I had in mind Laura, like when someone sticks to a diet for a while then goes on a complete binge

  8. Great post! I see the “living like a monk” syndrome as a financial counselor and educator fairly often. After penny pinching for weeks, it’s human nature to feel like we “deserve” to have some fun… we just have trouble controlling how much we spend on that fun.

    Here are my steps to debt elimination:

    1. Stop going into further debt (i.e. create a spending plan – with short-term motivating goals attached – to eliminates credit cards from our routine spending)
    2. Adjust our spending behaviors to match our spending plan
    3. Take 10% from our normal monthly groceries, gift giving and entertainment amounts and send to the debt we want to get rid of first (for most of us this would be the smallest balance debt first, but for the financially disciplined and committed it would be the highest interest rate debt first).
    4. If step 3 does work (perhaps APRs are too high or late and over-limit fees are killing you), meet with a credit counselor (find the trusted agencies at the Dept of Justice – http://www.justice.gov/ust/eo/bapcpa/ccde). There’s no direct impact on your credit score and any notation on your credit report comes off once you leave their program. There are enrollment and monthly fees, though they are capped at reasonable amounts by each state.
    5. If you don’t have regular income, but you get a tax refund or other large chunk of money, consider working out settlement with your creditors where they accept as little as 50% of what you owe. This can be particularly effective with collection accounts, but it will do more damage to your credit.
    6. Last stop is bankruptcy. In extreme cases, it is a debt elimination strategy, although never a pleasant or easy one. You’ll need to meet with an approved credit counselor anyway (see step 4), and you may lose your home, but bankruptcy exists for a reason. Many in my classes don’t realize that they can include medical expenses, collections, and other consumer debts in bankruptcy. It’s my opinion that bankruptcy attorneys are worth their fees, so anyone considering this final financial step ought to consult with an attorney.

    Good luck to anyone heading down (or thinking about getting on) the path towards freedom from debt.


    Author of “Everyday Money for Everyday People”

    • Robert Bell says:

      Thanks for the great comments Todd. I’m sure your tips will help out some of our visitors looking for more information on the subject

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