- Sylvia Ho
5 Tips to Get Out of Debt and Take Control over Your Money
Updated: May 10, 2022
Did you know that for every $1 Canadians make, they are $1.71 in debt? That means for every $100 you make, you owe $171! This is called the household debt ratio and it has been a growing concern for many.
Are you one of thousands of Canadians living paycheque to paycheque? Is your debt getting out of control? Are you lost on your options to tackle the bills that come each month?
*Data updated as of Dec 11, 2020 via The Canadian Press
These next 5 steps will help you take control of your life.
1. Get the Facts
List out your debts. Sometimes it’s easier to ignore the hard numbers, but anxiety and uncertainty only worsens when we don’t have a clear picture of where we stand. List out your minimum monthly payments, the amount owing, and the interest rate. Then write down how long it will take to pay off your debt if you continue making the mortgage payment. Most credit card companies include a calculation on each monthly statement that shows how long it will take to pay down your credit card debt if you only pay the minimum amount. Use this data to get clarity on your current finances.
2. Cut Back on Spending
Cut back your spending and start budgeting. Get a good sense of where your money is going each month. Start a simple spreadsheet and categorize your expenses. Could you eliminate unnecessary costs such as your phone landline, magazine and music subscriptions? Are you a sucker for the latest bestseller? Borrow books from the library instead of buying them. My family made the decision to unsubscribe from satellite tv. We now use Netflix and stream the hockey games we love; we don’t miss regular TV at all! There are ways… you just need to take 10 minutes to look at your bills and find the money!
3. Find Extra Income
I saw a Pinterest post recently that listed out 60 side hustle jobs that you can do from home. Instead of binge-watching your favourite shows, pick one night a week with your family where you all compile a “Progress” video list using YouTube. There are regular people out there, just like you, who made some decisions that got them ahead. One of my favourite channels is Our Rich Journey; they have tons of tips about saving, investing and making your money work for you!
Thinking about renting out your parking spot, or better yet, your basement? Well, Toronto is now allowing laneway rental homes to support the ever-increasing housing shortage.
4. Implement a Debt Pay-Down Strategy
I recommend 2 potential ways to pay off your debts:
Snowball method: Pay off your smallest debt first and once that is paid off, onto the next! Since you won’t have a payment due on that first debt, you can increase the payment on the second debt. The snowball method is mentally satisfying and builds confidence in your ability to pay off debt.
Avalanche method: Pay off the highest credit card interest rate first, then move onto the next one. With the avalanche method you’re able to pay off debt faster, but it’s not as immediately rewarding especially if it’s a large amount of debt.
5. Merge all your Debts with Your Mortgage
This process works best if you have a home and can qualify with your income. The interest rate and payments will be much lower after merging your debt. You will be able to get immediate relief, but keep in mind that this is a band-aid solution. It’s important to explore how you got into debt in the first place to prevent it from recurring.
So, are you the type of individual who will take action today and make a plan?
Are you the type to read this article and then go back to your busy life?
If you fail to plan, you plan to fail. Remember that we all have a choice, and your past doesn’t have to dictate your future.
Book a 10-minute phone consultation and allow me to be your cheerleader through this phase!
LIVE DEBT FREE!