#NewYearMotivation: How to Lighten Your Debt Load in 2019Jan 17, 2019
It’s a new year and there’s a good chance your debt load is heavier than it was a couple months ago. And, unfortunately, all that holiday splurging comes with a price — the dreaded debt hangover. No doubt your holiday bills are beginning to roll in. And although you might feel the urge to shred them or delay opening them, it’s time to face the music and make a plan.
Here’s why you need to get off the debt roller coaster
Last October, Canadians told us that affordability is a major issue for them, affecting their lives in so many ways. In fact, BDO’s Inaugural Affordability Index report revealed that one-in-four Canadians struggles to feed their families, 38 per cent struggle to pay for clothing and essentials and more than half say their income isn’t enough to let them life debt-free.
Since 2017, interest rates have risen five times and they’re expected to keep rising in 2019. That means it will take Canadians longer and cost them more to repay any variable interest personal debt. In addition to affordability challenges, higher debt balances may be a recipe for financial disaster.
Five ways to lighten your debt load
It might seem like a daunting task which is why it’s easier to break your debt repayment into smaller steps. Follow these steps to lighten the load and get back on track.
- Calculate your debt. The first thing you need to do is figure out just how much consumer debt you have. You can use a debt calculator to plug in your numbers including their interest rates.
- Make a plan. How much money can you dedicate toward debt repayment each month? Once you know your debt totals, you need to calculate your monthly disposable income. That means every bit of money that isn’t assigned to living expenses, bills, food, etc. With your disposable income, plan to put 90 per cent toward debt repayment and 10 per cent into a savings account for emergencies.
- Go on a spending fast. After the holidays, January is a good time to decompress and evaluate your goals. Reducing spending is one goal that can keep you from adding to debt while saving you money. Read how this woman paid off $24,000 in debt by regularly freezing her spending. This is a great challenge for the whole family. Try it for a week and work towards longer periods of time.
- Increase your income. Earning an extra bit of income can fast track your debt relief as long as you’re committed to using it for that purpose. Use your skills and turn a hobby into a lucrative endeavor, sell off unwanted items in your home on Kijiji or find a part-time side hustle.
- Deal with your debt. To free up more cash each month, you might need to shift your debt balances. You can try DIY consolidation by adding your high interest debts onto a low-interest line of credit or credit card.
You can also try paying as much money as possible toward your debt balance with the highest interest, while maintaining minimum payments on the rest of your debts. Once that debt is paid off, work your way through the rest of your debts. This is the debt avalanche method.
Alternatively, you can compare your debt relief options using this online calculator or book an appointment with a Licensed Insolvency Trustee to go over your options.
Where do you want your debt load to be in a year from now? Don’t let another year of minimum payments pass. Deal with debt now so your hard-earned money stays in your pocket.
Need more money motivation? Follow Kerry Taylor from Squawkfox for frugal living and debt relief tips. You can also join our Twitter community by searching the hashtags #LeaveDebtBehind #NewYearsResolution #DebtSolutions