How did I get into debt so fast?
It happens so quickly. We need to do emergency repairs to our homes, our children need tuition money, our appliances fail and need replacement or we face family emergencies. At first, offers such as 0% for 6 months sound really good at the time, but when the real interest rates of 15% and up kick in after the trial period we find our debt load going up quickly.
In these troubled economic times when so many people are losing work, making less money and borrowing more just to make ends meet. It can become a destructive cycle and suddenly we find we owe $10 000 on credit cards, or our line of credit hits new highs as we are faced with a higher cost of living. If most of the debt is carried on credit cards, this becomes a very expensive monthly cost to maintain.
Tamsin McMahon wrote in February that Canadians owe an average of $1.53 for every dollar they earn. This is very close to the average debt American households were carrying before the housing market collapsed and the global economy moved into deep recession. There has never been a better time to consolidate debt and start paying off what we owe.
How do we get out of debt?
To get out of debt, we need to get some credit help advice and begin a new disciplined approach to our spending. The whole concept of: buy now, pay later, needs to be adjusted to buy now if you can afford it and pay now. Too often we make impulsive purchases and end up paying far too much because of interest. This needs to change.
Tips to eliminate debt:
- Consolidate your debt: Stop paying interest on multiple credit cards. If you own a home, you can apply for a home equity loan and pay a lower monthly interest to provide more cash flow.
- Pay down your debt: Once you reduce your monthly interest payments, all extra money should be dedicated to paying down your debts – not increasing your spending
- Live now, pay now: Review your spending habits. Think twice before you purchase something. If you lost your job tomorrow, what else would you lose? Do you really need to buy that new car, those new shoes or to go on that expensive vacation? If not, save up for it. Wear out your stuff before you replace it.
- Keep a record of what you spend: Do you know how much you spent on gas last month? How much do you spend on coffee out, or buying your lunch? When you see your monthly expenses, multiply that by 12 months to see your yearly spending. Is spending over a $1000 year for one coffee a day worth it to you? Is spending over $6000 a year on lunches out worth it? Just by bringing your lunch to work you can save thousands a year!
- Set up a budget: Aim to pay off your debts. The sooner you pay them off, the quicker you become free of them and your credit score will go up. Figure out your monthly costs and find where you waste your money. A great new program called Mint can help you manage your money easily. Be honest in the numbers your write down and don’t just estimate.
- Reduce your credit card use: If you have more than 2 credit cards, get rid of them. Start paying in cash and reducing the number of times you use your credit cards. Don’t be seduced by offers of low interest rates or special deals. Always read the fine print. Get more tips on credit cards here.
- Get some advice: Talk to a financial professional and find out how to better manage your debt. The team at One Stop Mortgage helps people every week in Vancouver, Calgary, Edmonton and across Canada to manage their debt and reduce their monthly payments. Give them a call and get started today: 1 877 874 8988 (toll free) or 604 874 8988
When you start paying off your debt it feels amazing! Suddenly you start to get control on your finances, which reduces stress and gives you more freedom. Reducing your debt and monthly payments gives you more money and more freedom. Why work for the bank and your credit card companies when you could be working for yourself?
One Stop Mortgage can help
At One Stop Mortgage, our team of mortgage and credit specialists can help you consolidate your debt and begin to repair your credit.
As mortgage brokers, we have access to numerous financing sources and can provide help by working hard to get you the best financial package to suit your credit needs with debt consolidation help, home equity loans and more.
1 877 874 8988 (toll free)
604 874 8988
604 874 9109 (fax)