The majority of Canadians will find themselves in debt at some point in their lives. While this may seem normal, it’s important to try and keep that debt to a minimum and not let it spiral out of control. Having a plan to pay down your debt is the best way to ensure your debt doesn’t continually increase. Most people can pay off their debt themselves with a little hard work and discipline, but other times, you may require the help of a credit counsellor.
If you’re at the point where you feel your debt is manageable to tackle yourself, follow our DIY debt reduction strategies:
Analyze your expenses: The first thing you need to do to understand your true debt picture is sit down and honestly look at how much money you are bringing in and how much you are spending each month. If you have $10,000 in credit card debt but are barely able to pay the rent, there’s a problem. It’s time to figure out ways to make more money, cut back on your expenses, and focus on your debt so that getting rid of it becomes your primary goal.
Shop around for a better interest rate: Another essential debt reduction strategy is to figure out what kind of interest rates you are paying on your debt. You may be surprised to see that your interest may be outstripping your minimum monthly payments. If you have a maxed out $5,000 credit card and your minimum payment is only $100 but your interest rate is 29%, then obviously paying only the minimum payment is not going to even make a dent in the debt. Do yourself a favor and shop around to see if you can find a better deal on interest rates.
Take advantage of promo offers: Oftentimes credit card companies will offer special deals for new customers. You may be able to take advantage of their introductory 0% interest rate for 6 months on balance transfers. This will allow you to spend several months paying down the actual debt instead of interest. Be careful to fully read the fine print to see what the interest rate will be after the introductory time period is up. The goal is to pay off as much debt as possible during this time so that you pay less in interest.
Beware of your overdraft: Overdraft deals often come in some of the same glittery packaging that credit card offers do, but the thing about overdraft is that it’s probably best not to have. If you are overextending your chequing account balances, you probably should cut up your debit cards and only use cash. Overdraft is a big burden that many of us use so thoughtlessly. If we don’t pay it off in a timely fashion, it winds up costing us much more than its worth.
If you have tried some of these debt reduction strategies but still have that cloud of debt hanging over your head, you may need some professional help. Credit Counselling Services of Atlantic Canada can help you by taking a look at your debts and create a plan that will help you realize your dreams of financial freedom.