6 Mistakes People Make When Paying Down Debt

Lamine Zarrad
February 25, 2022
3 mins

Paying down debt seems like a no-brainer. You’re repaying money you’ve borrowed, and decreasing your overall debt. What could go wrong?

Well, it’s actually a little more complicated than that. In fact, your debt payoff strategy might be what’s keeping you from reaching your goals.

Here are some common mistakes that people make when paying off credit cards and other loans:

1. An overly ambitious payoff plan

It might feel like your debt piled up overnight…but paying it off won’t be so speedy. More debt means higher minimum monthly payments, which have likely kept you cash-strapped for a long period of time. 

By devoting more and more of your budget to minimum payments, less and less has gone to savings. Without the cushion of a savings account, emergency expenses like medical bills, car repairs, and more, simply add to the “snowball effect” of debt, in which borrowing money causes you to need to borrow even more money. 

By the time you’re ready to tackle your debt, you may not have much wiggle room in your budget. It’s important to have an accurate understanding of how much cash you have left after paying all your monthly obligations, and variable expenses like groceries, gas, and more.

Paying down your debt won’t help your credit much if it causes you to fall behind on other payments. Once you know exactly how much is left to put toward your debt, you can create a debt payoff plan that won’t land you right back where you started.

2. Relying on unrealistic changes to your budget

Reducing your expenses is a great way to free up some cash to put toward paying down your debt. However, it’s important to make sure that your plan is actually achievable.

For example, you may decide to cook all your meals at home instead of ordering from restaurants. On the surface, this is an excellent plan. Heading out for lunch instead of packing your own food, going out to eat with friends, and Door Dashing your dinner after a long day can really add up. 

Although you’re eager to pay down your debt, planning on drastic changes to your budget could backfire. Is it realistic for you to pack your lunch every day, or to stop grabbing some grub with your friends? Rather than eliminating these expenses from your budget all at once, try to make gradual changes that won’t feel overwhelming. 

You’re less likely to throw in the towel if you start by making small expense reductions and leave yourself some breathing room. Besides, some of these “extra” expenses, like money spent on hobbies, gym memberships, and more, are great for your mental health. 

Reading recommendation: "How to Budget, Save, and Build Financial Wellness"

3. Missing income opportunities 

We live in the age of side hustles, and opportunities to stack some extra cash are easy to come by. Turn your down-time into debt-reduction-time with one of these common side gigs:

  • Delivery driving
  • Freelancing (try Fiverr or UpWork)
  • A Print On Demand (POD) or Drop Shipping store
  • Blog or vlog about something you love, and monetize it
  • Find a part-time job on your off hours, such as an early-morning barista gig or a night shift stocking a grocery store

Spending time with your friends and family and being able to rest and recharge are important. If you choose to try a side hustle, flexibility is key. If you burn out, your budget will too.

4. Taking on new debt

Have you heard the phrase “it takes money to make money”? This phenomenon could be what puts you further into debt while you try to pay it down. 

Here are a few scenarios that cause people to go further into debt while trying to get out of debt:

  • Acquiring student loans in hopes of landing a higher-paying job
  • Transferring an existing credit card balance to a new card with lower interest…then maxing the old card out again.
  • Pre-purchasing inventory or equipment for multilevel marketing endeavors

In each of these examples, good intentions can quickly lead to increased debt. Adding monthly payments and interest charges to your budget detracts from the amount you’re able to dedicate to paying off your debt. 

If you’re considering making a long-term move that requires you to take out a loan, it’s important to consider the impacts to your budget in the immediate future.

5. Neglecting your savings

It’s easy to push your savings efforts to the bottom of the priority list when you’re trying to pay down your debt. Those monthly minimum payments and not-so-great credit ratings demand your attention and leave little room for anything else.

Despite the urgency you feel in reducing your debt, it’s helpful to see your savings contributions as part of the grand plan. Life is unpredictable. Car trouble, family emergencies, or being temporarily unable to work can throw your budget into chaos if you don’t have a cushion.

The standard budgeting rule goes like this: First, pay your bills. Next, pay yourself by putting money in savings. After that, you can determine how much money to allocate toward your debts. 

6. Not accepting help

Many of us don’t have a rich uncle or even a family history of financial stability to help us build our future. What we do have is hard work and new options to help people tackle debt and achieve their goals.


StellarFi is a service that allows you to build credit just by paying your bills. With no credit checks or interest charges, you can have access to StellarFi’s credit-boosting benefits and tools that help you plan a bold and exciting future.


The bills you pay should pay you back.


The StellarFi blog is intended to serve as an informational resource. While StellarFi can help you build your credit, we do not provide financial, legal, or accounting advice. Please consult a trusted advisor for financial, legal, or accounting guidance as needed.

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On-time payment history can have a positive impact on your credit score. Nonpayment may negatively impact your credit score. StellarFinance, Inc. will report your on-time payments to Experian®, Equifax® and TransUnion®. Impact on your credit may vary, as credit scores are independently determined by credit bureaus based on a number of factors including the financial decisions you make with other financial services organizations.