1. DEBT SOLUTIONS START WITH CREATING AND LIVING WITHIN A BUDGET
An important step in starting to tackle your debt is to create and live within a budget. Calculate your monthly spending and find a way to reduce your expenses so you save at least 10% of your income every month. Living below your income and saving in this way helps:
- Shrink your debts over time
- Put money away to apply against your debts
- Give you a financial cushion when unexpected emergencies occur
- Invest in your future
2. PAY DOWN DEBTS WITH THE HIGHEST INTEREST RATE FIRST
If you have multiple debts at various interest rates, it is important to prioritize which debt you should aggressively tackle first. While you should always pay at least the minimum amount on any debt you incur, it’s best to focus extra efforts on debts that have the highest interest rate.
3. SHIFT YOUR DEBT FROM HIGH TO LOW INTEREST RATES
One way to start eliminating your debt faster is by taking advantage of a line of credit. Since a line of credit is always at a much lower interest rate than other debt, if you have a line of credit, try to pay off your credit card debt with the line of credit. Ask your bank if they will increase your line of credit limit, if needed, to make it possible to pay off your credit card debt.
If you own a house or condominium unit, you can inquire about refinancing your mortgage or getting a second mortgage to pay off your higher interest debt. These strategies essentially consolidate your debt at a lower interest rate.
4. TRY TO INCREASE YOUR INCOME
If at all possible, look for ways you can bring in a little extra cash every month. Any extra money you put towards your debt will help. If you can take on extra hours at work or manage a second job, the added income will help make your debt repayment easier. If you can take on a roommate, boarder or renter, the extra income will reduce your debt more quickly.
5. BARTER FOR SERVICES WHERE POSSIBLE
Instead of spending money on certain expenses, see if you can trade services to keep your expenses down. For example, if you can offer professional services in one area (e.g., child care, elder care, hair cutting, cooking, bookkeeping, dog walking, personal training, lawn care, snow removal), you may be able to barter with other service providers instead of paying from your income.
6. FOCUS ON PAYING YOUR DEBT
Like any other goal you want to accomplish, paying off debt requires a plan that will help you take the necessary steps to eliminate your debt. Set specific goals for reducing your debts. Credit counselling can help you see your spending more objectively and help you reset your expectations and habits to fit your new financial goals.
Implement your debt reduction strategy by setting up a payment calendar with due date and the payment amounts you expect to make. Sign up for overdraft protection and set up automatic bill payments through your bank or register for online payments.
CONTACT TRUSTEES SERVING TORONTO (AND ALL OF ONTARIO) AT HARRIS & PARTNERS
If you need help from those who specialize in solving debt problems, contact us at Harris & Partners Inc. Licensed Insolvency Trustee. In Toronto, North York, Brampton, St. Catharines, Ottawa, Pickering, Oshawa, Hamilton, Kitchener, Brantford, Barrie and Markham, our federally Licensed Insolvency Trustees can help you achieve long lasting financial solutions. Call us today for your free consultation at 1-800-268-8093.