I was reading a BMO press release, and it explained that over 25% of Canadians are living from paycheque to paycheque, and that one in every three Canadians are living at or beyond their needs. What we all need to remember is that it is important that we maintain a healthy credit rating, and to do that we have to ensure that we are not affected by excessive debt.
What can I do to keep my debt from increasing?
There are several things you can carry out to ensure that your debt is at manageable levels. I have compiled a few tips that can help you do so:
1. Create a Budget
You need to create a budget outlining your spending, and expenses. The goal is to spend less than you make, and take the excess money to put into your savings on put down on your debt. In some cases, if you are looking to decrease your debt a lot, then you may want to forgo a good portion of your savings and put the majority of any excess money down on your debt. Now a budget is only as good if you carry it out; do not spend the time creating one and not using it. Trust me, you will be surprised at how efficient it can be.
2. Pay down your credit card debt
If you have credit card debt, even worse, if you have debt on several credit cards then you may want to consider consolidating the debt onto one low interest card and begin paying down the debt. Capital One offers a great credit card – the Capital One SmartLine Platinum Card. It gives you a low interest rate of 5.99% on balance transfers, which can be beneficial for anyone carry a high balance on several cards.
3. Always have a backup plan
It is realistic to say that not everything we do goes the way we plan it. You could be following your budget perfectly, but then something unexpected comes up, causing you to fail to meet your financial obligations. This is where you need to have a backup plan in place to cushion any unforeseen circumstances. The easiest way to prepare for these kinds of situations would be to have an emergency fund. Creating an emergency fund would allow you to meet your financial obligations, in the event you have unforeseen costs, such as loss of work, or even damage to your car, and more. The only problem with this is that if you are trying to lower your debt, it would cause the process to go slower, but at least you will be covered for the payments in the event you need to be.
4. Become mortgage free faster
You may want to consider cutting your amortization to 25 years, and possible increasing your monthly payments. This will help you pay down your mortgage faster, and also let you save a lot of money in interest costs.
By following the tips above, you are sure to keep your finances in check, especially your debt. Who knows, you could possible eliminate your debt sooner than you may have thought possible.
What have you been doing to manage your debt?