Many people never realize they’re one financial crisis away from taking on debt. For others, it can be ignoring the reality of their financial debt obligations or failing to get professional guidance. The truth is, debt happens to good people, and carrying debt could impact your financial success for years to come. At 4 Pillars, we discuss valuable time tested methods for getting Canadian’s out of debt in order to get their finances back on track.
10 Tips To Secure Your Way Out Of Debt
#1 Admit You’re In Debt
Be honest with yourself about your debt. Collect the data from your debt, analyze it, and decide on a plan to become debt-free. Ignoring your debt issues and believing they will go away will only make things worse and could have a devastating impact on your credit score. Make a list of all of your debt that includes:
- mortgage payments
- car loans
- utility payments
- small loans
- credit cards
- additional lines of credit
Credit: 4 Pillars
Creating a list will help you sort out which debt obligations need the most attention and help you create a plan for paying off your debt.
#2 Establish A Budget
A budget is a great way to “manage” your way out of debt. Individuals should create a written budget for their finances and financial obligations. If you’re in debt, it’s best to prioritize your financial obligations. Work hard to never exceed your budget. You can create a weekly or monthly budget to help you manage your debt.
#3 Create A Savings Account
Opening a savings account can help you with unexpected financial obligations. In fact, try opening a high yield savings account that builds interests over time and pay off your financial obligations with your cash savings and the benefits of interests. The benefits of a savings account will pay for itself in the long run. Individuals should start their savings account and deposit money often. Your savings account will act as a financial shield. In fact, using your savings account for the “pay yourself first” principle is strongly recommended.
#4 Pay More Than You Owe
Credit card responsibilities are one of the easiest ways to fall into debt. You start with a few credit cards, get a credit limit increase, and higher interest rates are applied to your monthly payments. To avoid languishing in debt, you should always pay your credit card balance in full. However, if you already have sizable debt, you should be paying more than the minimum payment due. Consider a debt snowball calculator in order to help devise a structured plan.
You don’t have to pay more than you owe just on your credit card or line of credit debt. You can certainly pay secured loans off early, such as vehicle loans.
#5 Consider Supplemental Income
A seasonal or part-time job is a great way to earn an extra income, but the money can go a long way towards lifting you out of debt. For example, around the holidays, consider getting a seasonal job to help you with those extra purchases or get a part-time job to help you pay off your debt. In fact, a part-time job is also a great way to add extra income to your savings account or help you balance your budget.
#6 Spend Less
One of the easiest ways to avoid debt is: spending less money on the things you want! As much as you want those new shoes, an expensive truck, or a pricey vacation, those things can wait. Tell yourself: “you’re going to spend less money and stick to your goals.”
#7 Sell What You Don’t Need
If you have stuff lying around the house that you don’t use anymore, you can consider a good old fashion yard sale to get rid of those items and pay down your debt. You may have more unused stuff around the house than you think. A Facebook yard sale group or online reseller are also great ways to get rid of items you no longer need and make some extra cash to pay off your debt.
#8 Choose Cash Only Options
Choosing cash only options will help you avoid using credit cards and creating more debt. Only bring the amount of cash you plan to spend and don’t exceed your cash on hand. In fact, cash on hand will eliminate a lot of spontaneous spending and limit what you buy. It can be easy to charge $400 to a credit card, but it will be a lot harder to hand the cashier a stack of bills. Cash spending will help you make better financial decisions.
#9 Use Debt Resources
There are plenty of online and other resources to help Canadian’s get out of debt and live the life of financial freedom. Earlier we shared the debt snowball calculator which is a great tool used to calculate your debt to see how long it will take to eliminate your debt over time. To use a debt calculator, you should set your goals, add them all up, calculate your income, and see if you’re realistically anticipating the time and money it will take to pay off your debt.
#10 Consider Professional Assistance
Consider professional assistance to help you manage your debt. A professional, representing your interests, could structure a plan to help you reduce your principal debt load. Most professionals require a fee, but a debt resolution pays for itself when you have the freedom of living a debt-free lifestyle and staying out of debt.
It can be easy to ignore your debt, but your financial obligations can always come back to haunt you later. The best way to ensure you’re successfully working your way out of debt is by tackling your financial obligations head-on. There’s a way out of any type of debt if you plan accordingly and take the necessary action.
You’re invited to contact us at 4 Pillars for a FREE debt consultation today in Northern Ontario!