Mistakes People Make After Paying Debt

You are probably feeling excited that you have finally gotten out of debt or paid off your credit card balance or mortgage that has held your finances back for the past few years. However, a new challenge awaits you; of not getting back into debts. Studies have shown that Americans have ended the fourth quarter of 2017 in debts, which is an alarming rate since the debts are more than ever before. You need to take smart financial decisions with the extra income you get after getting out of debts, so that you don’t get back into debts. If you are wondering how to make this happen, these guidelines will do the magic for you.

1. No longer having financial goals

Unfortunately, most people feel relieved after getting out of debts, such that they throw their energy into spending the extra money instead of saving. However, financial experts advise people to still maintain their financial goals by having a savings plan and sticking to their budgets. Notably, it doesn’t mean that you are financially secure just because you got out of debts.

2. Closing your credit cards

After you get out of debts, the next thing you are thinking about is to close your credit cards to avoid going back to debts. However, it is sometimes not the most sensible decision because you might need to buy a car, a home or take out a loan in future. You need a good credit for you to get favorable loan terms. Most financial experts will advise their clients to maintain their credit cards because lenders will want to see a long borrowing history, and closing your credit card will shorten your borrowing history.

3. Never checking your credit report

Most people who have gotten out of debts don’t have plans of taking out loans in the future. Therefore, they don’t review their credit reports. However, it is advisable to look at your credit report often; at least once a year so that you are certain that your identity has not been stolen.