Are you feeling overwhelmed by your debt? Not to worry there are things you can do to curb the tide. There is no one size fits all solution for getting out of debt but there are things you can do to try and reduce your overall debt level. By being aware of what you are spending and ways to reduce total debt quickly you can have great success. Being aware however, is only the first step. After identification and building awareness of your debt situation you need to actively participate in decreasing spending, increasing saving, and increase debt servicing.
Start Decreasing Your Debt Today
The following are 7 strategies Canadians can use to decrease their overall debt:
- Pay more than the minimum payment.
- Pay off the debt that has the highest interest rate first and work your way down
- Start side work or passive income generation
- Create a realistic budget
- Sell stuff you don’t need
- Ask for lower interest rates on your credit cards*
- Drop expensive habits.
1. Pay more than the minimum payment.
Paying only the minimum payment on your debt will make it hard to pay down the principal on the debt. This is because the vast majority of the minimum will be put towards servicing interest – and only paying off the interest will not get you much further ahead.
2. Pay off the debt that has the highest interest rate first and work your way down
By paying off the debt with the highest interest rate first you can reduce your total debt load and save yourself $1,000’s in interest payments long term. Make sure you are covering all of your minimum payments but put any extra money towards your credit card with the highest interest rate. This will help you to pay down the principal owing faster and reduce lifetime interest payments.
3. Start side work or passive income generation
If you are able to pick up work on the side – do it! Put any income from this extra work towards servicing your debt. Passive income generation is also ideal, however, can be a little more difficult to implement and can take some investment. When looking for side work try and find something that will not take up all of your free time and will give you enough extra cash flow to put a sizable dent in your debt.
4. Create a realistic budget
If you create a realistic budget of what is coming in and going out each month – and stick to it, you will be able to see exactly where your money is going and how much extra money you should have at the end of the month. With this extra money you can then pay down your debts.
During the first couple of months try leaving your credit cards at home – this will help you not spend beyond your means. Living within your budget may not be possible every single month but as long as you are hitting your targets more months than you are not you will be okay. The more you stick to your budget the easier it will be.
Looking for help creating a budget? Check out our Budget Worksheet that will help you keep track of your finances.
5. Sell stuff you don’t need
We all have things laying around creating clutter that we really truly don’t need. If you are looking to get some quick cash you can put towards your debt consider selling things your rarely use and wont really miss. Websites such as VarageSale and Craigslist are perfect for this type of thing. You can sell your unwanted stuff piece by piece giving you little extra bursts of income that you can put towards your debt.
6. Ask for lower interest rates on your credit cards*
At times you can request a lower interest rate for your credit card. If your credit card company is standing firm consider a Balance transfer to another card/company. It is important to take into account any transfer fees or charges associated with moving to/from your specific credit card.
*Note: Balance transfers can decrease your credit score and should be used sparingly. Repeatedly opening, closing, and transferring balances could significantly affect your credit score.
7. Drop expensive habits.
Some habits are expensive – whether it be that $7 daily coffee, smoking, drinking, or daily lunches. By stopping this type of spending you can stay within your budget and save $1,000’s every year.
If you would like help getting out of debt contact us today for your free consultation!