Tips for reducing debt

“Debt is like any other trap, easy enough to get into, but hard enough to get out of.”
-Henry Wheeler Shaw

One of the first things that you need to realize is how did you get into debt? How did you get to where you are now?  Getting out of debt requires that you change the habits or circumstances that led you into debt in the first place. Often, people end up in debt simply because they have over-indulged and over-borrowed. Sometimes it is a case of misfortune such as medical debt stemming from uncovered medical expenses or debt due to divorce. Once you recognize what caused your debt, you can take steps to prevent the same thing from happening again.

  1. Check your spending habits and create a budget. To begin, track all your expenses for at least three months and calculate your month to month living expenses. Anything left over can be used for debt payments. Categorize your expenses (ie, food, housing, vehicle expenses, entertainment, etc.) and total up each category. Once you have analyzed your spending, you’ll need to make changes as to how you allot your money. For example, if you think a disproportionate amount is going towards one or another category, determine how you can reduce these expenses.  Also recognize that budgets change over a period of time.  be prepared to adjust your budget accordingly.
  1. Don’t take on more debt.If you continue to spend beyond your means, it will be difficult to realize your goal of being debt-free.
  1. Total up how much debt you have? Many consumers don’t realize their total debt load until they actually sit down and add it up. Now’s the time to face reality. Make a list of all your debts, the amount you owe, the interest rate, and the minimum payment. Use recent billing statements, canceled checks or bank statements to develop a complete list of every creditor.
  1. Create a debt reduction plan. The plan doesn’t have to be complex. All you really need to do is prioritize your debts, either by interest rate, by the balance owed, or some other criteria that you choose. Then, decide how much you are going to pay every month. It’s generally best to make a lump-sum payment to one of your debts while paying the minimum on all the other accounts. Then, once you’ve paid off one creditor, redirect your lump-sum payment to the next creditor on your list.
  1. Try to set a payment time frame that is reasonable, but fast enough to make progress. If your time frame is too long, you may lose focus due to a lack of progress on paying off the debt quickly. If your time frame is too short, you will feel overwhelmed and feel it is unrealistic to continue.
  1. Change your way of thinking. Pay off your debt. Rather than focusing on paying the minimum payment each month, change your focus to pay off the balance each month. Read the disclosure statement on your credit card bill.  This will tell you how long it will take to retire the debt if you make only the minimum payment.  That presumes that the debt doesn’t get any larger and interest rates don’t go up.

If you are so far in debt that paying it off will take years, you need to contact us.  Call us and schedule an appointment with one of our Licensed Insolvency Trustees.  There are many options to reduce your debt including a consumer proposal or a bankruptcy, both of which will reduce debt.

We will listen to your needs and provide you with objective advice.

Call us for an appointment at (604) 605-3335.  It’s not too late.