10 Ways of get out of debt
There are many Canadians who would like to pay down their debts or pay them in full. However, they are not sure of the best way to manage debt payments or where to start. The reality is that there is no ‘one best way’ of debt management that works for every Canadian battling huge debt. After all, everyone faces a unique set of financial and debt management challenges. Here are some of the proven tips and suggestions that will help get you started with debt management and payment. Applying many of these suggestions will help you get out of debt fast.
1. Set a Goal
Set SMART goals
It is essential to set realistic debt management and repayment debt goals, particularly when they are about paying off credit card balances with high-interest rates or other forms of consumer debts such as lines of credit, overdrafts, and vehicle loans. Though it is easy to run up balances, it will take self-discipline and time to pay your debts off. So, make sure that your goals are specific, measurable, attainable, relevant and timely.
2. Make a Spending Plan
The plan B cliché must fit in in your plan. The reality is that plan B is no longer a cliché when it comes to paying your debts. Note that your budget is more than just a spending plan. It should help you keep your credit card balances up-to-date and repay other debts successfully. A budget or a spending plan is something you must lay out to ensure you spend less than the total income you make. Some people still think that they don’t need a budget, but there is a good chance they haven’t tried one yet. From a financial perspective, a well-thought-out budget can help you gain control of your expenditure and successfully repay your debts.
3. Spend Less Than You Plan to Spend
Many people wish they had bigger paychecks than they already have. Probably you have heard that you can have nearly anything you want, but you cannot afford everything you want. Most people often get into debt and stay in debt just because they want to buy what they want whenever they want it. Remember, not even millionaires can comfortably pay for everything they want. So, if you can be comfortable with less than what you really want, even if it is temporarily, you can save some money to pay down your credit card debt. By the time you finish paying your debt, you will probably have set new priorities and can use your savings to address other important issues.
4. Track Your Spending
Identify opportunities to cut back your expenditure.
For some Canadians, reducing their expenses can save them nearly as much money as they would earn when working part-time. You would not know how much money you can save unless you start saving. It is recommended to track your daily and monthly expenditure. Record what you spend rather than what you think you should spend over a period of a month. If you’re not honest with yourself, tracking your expenditure or identifying opportunities to reduce your expenses may not work.
5. Pay Off Your Most Expensive Debts First
A smart strategy to get out of debt is to ensure that you make minimum payments on your credit card balances (except for one) and other debts. Choose a single debt that is charging you high-interest rates and focus on paying it off first. Next, pay off the most expensive debt. Continue paying off your debts step-by-step, and eventually, you will be left with the least expensive debts to pay. This strategy can help you get out of heavy debt quickly and perhaps keep you motivated to take debts that you can pay comfortably.
6. Consider Becoming a One Car Household
Suppose you have two family cars. In that case, you may want to get rid of one vehicle and either take transit, walk to work, or carpool. This can help you save a couple of thousands of dollars annually by just getting rid of your second car. Just think about it: an average car owner spends more than $9000 annually to maintain and operate a car. You can forego car ownership and maintenance and use that money to pay down your debt.
7. Save on Groceries to Help Pay Off Debt Faster
Another way to save up money and pay your debts faster is to stock up on groceries when they’re discounted or go a step further to stockpile, then skip one or more grocery shopping monthly. That means you will live off of the groceries you stockpiled. Generally, filling your kitchen cupboards when groceries are on discount and skipping grocery shopping can save you a maximum of 25 percent on your yearly grocery bill. Applying these savings to your current debt can put you ahead of debt payments.
8. Refinance Your Mortgage
Assuming you own a home, there is a good chance you have enough equity to successfully consolidate your debts into your current mortgage. If you have insufficient equity in your house, extra mortgage insurance expenses may be costly. Be sure to consider other options and seek financial or credit counseling from an expert (not your lender). If you realize that a credit union or bank is not ready to help you, do not rush off to find your first house equity finance company that’s ready to offer you money. Instead, consult with an accredited, reliable credit counsellor.
9. Use Savings
Paying your debts beats financial savings.
Most people contribute to their savings plan regularly. This is great. However, that money can help you pay your outstanding debts faster. If you have an emergency fund and are now saving for other expenses, it is possible to stop contributions to your savings until you pay off the amount you owe. This is helpful for people who are not saving for a specific goal, such as financing kids’ education or paying for your family car’s repairs.
10. Speak with a Credit Counsellor – It’s Free
If you’re deep in debt and struggling to make headway repaying your debts, begin by consulting with an accredited credit counsellor. There are different credit counselling programs that could help you learn how to manage your debts. The credit counsellor will explain various options of dealing with debt and help you choose an option that makes sense most to your financial situation. Sure, you need to pay your debts fast. But consulting with an experienced credit counsellor could help you realize other options you had not thought of.
How to Get More Help to Get Out of Debt
Most people are in debt. If you are struggling with your debts, the sooner you start addressing those debts, the sooner you will have them paid off. Months and years will pass whether you choose to pay the money you owe or not. So, begin by implementing one or more strategies discussed above. After all, you have nothing to lose if you begin paying down your debt.
Generally, managing debts is not an easy task, particularly if you are deep in debt. Seeking financial and debt management guidance is a good starting point. If you need help to draw a budget or any other plan to start paying off your debts, contact York Credit Services for confidential help. You can meet with an expert in person or schedule a virtual meeting.