6 debt mistakes you can avoid

Moving past these common pitfalls helps make getting out of debt easier.

Most American households carry debt, but that's not necessarily a bad thing. Debt might include meaningful things like mortgages or educational loans. What's most important is taking on and managing your debt wisely so that it doesn't prevent you from achieving other goals, like retirement or travel. A simple way to do that is to watch out for these six common debt mistakes.

1. Missing payments

Making your debt payments on time should consistently be one of your top financial priorities. Missed payments can have repercussions beyond penalty fees. They may reduce your credit score, which in turn could make it more difficult or expensive to buy a home or secure student loans. A lower score could also result in larger monthly payments on future loans or increased deposits on utilities and rent.

A simple way to avoid late fees and credit-score dings is to see if your lender allows automatic payments. If the timing of a bill is causing you problems, your lender may also let you adjust the due date on your statements.

2. Trying to tackle your debt without a solid plan

When paying down debt, it's crucial to create an informed plan that's ready for life's changes and unexpected expenses. Start with a budget that includes your debt payments, and prioritize those debts with high interest rates and no potential tax benefits, such as credit cards. You can either start with the highest-rate card (saving you more money over the long term) or with the lowest-balance card (allowing you to see your efforts pay off quicker). To keep track of your progress and adjust your plan as things change, try our debt management tool.Opens in a new window

3. Being so focused on paying down debt you forget to save enough

Paying off debt is typically just one of several financial priorities a person may have. Saving less for retirement to help pay down debt can be a costly mistake. Not giving your money time to compound can impact the quality of your retirement. If you're eligible for an employer match in your workplace retirement plan, try to contribute enough to get the full match—it's free money that could be growing for you.

Similarly, it may not be wise to draw from your emergency savings to pay down debt. Instead, see if you can reduce expenses.

4. Paying only the minimum amount each month

Getting out of debt can take significantly longer if you are only paying the minimum. Try to pay extra each month, prioritizing your highest-interest debt. This doesn't mean you have to deny yourself all your "fun money." Even a little extra each month can shave months off of how long it takes to eliminate debt. Applying a windfall, such as a tax refund, toward paying down your debt also can help.

5. Accepting the highest amount offered when you qualify for a loan

When applying for loans or credit, keep in mind the long-term implications of having to pay that amount back. This is often a signicant concern when it comes to student loan debt and mortgages. It can be tempting to use the full amount the lender offers, but larger monthly payments can squeeze your budget, making it harder to save for retirement or maintain a good credit score.

6. Ignoring opportunities to help your situation

To help boost your efforts as you work toward getting out of debt, look for a 0% interest balance-transfer offer on one of your existing credit cards and transfer what you can from your highest-interest balance. Careful, though—the interest rate will probably jump to a higher number after the initial period ends, so make sure you pay off the balance before then. Also, be aware of any fees or penalties associated with the balance transfer.If you have some high-interest balance left after the transfer, reach out to the lender to ask about getting that rate lowered. Negotiating your rate can help more of your money go toward paying down your principal balance.

If you feel you're doing everything possible to cut down your debt and could still use help paying bills, consider the services of a reputable nonprofit credit counselor who could help you start seeing the results you're hoping for. Be sure to vet them through your local consumer protection agency. And remember, it may help to explore a fresh approach to your budget and overall financial plan with a TIAA financial consultant.