Do you feel like you’re drowning in debt?
You may feel like your finances are a lost cause and that your debt is completely unmanageable.
But there are ways you can get out of debt in Canada and get your finances back on track!
Keep reading to learn more:
1. Create a Budget
Creating a budget involves more than simply cutting back on your spending. It can help you see exactly where your money comes from and where it goes.
There are three parts to creating a budget:
- Where your money is going. Keeping track of your spending, no matter if it’s on personal items or bills, will help you determine your spending habits.
- Your needs and wants. By sorting out your needs and wants, you can begin to prioritize the things you need to spend money on and look at the things you can cut back on.
- Financial goals. Your budget should also include your financial goals, such as paying off your debts and starting an emergency savings.
Once you have these things figured out, you can begin allocating funds to the essential things you need to pay for (such as your rent, mortgage, groceries, etc.) and cut back on the unnecessary things in order to tackle your debt.
2. Speak to a Credit Counselor
When your debt feels like it is out of control, sometimes a budget isn’t going to cut it when you don’t know where to start.
Luckily, there are professionals out there to help you out!
Credit Counselors and Licensed Insolvency Trustees (LIT) are available to help you identify your debt struggles and come up with a debt management plan that suits your needs.
For instance, you may be able to file for a consumer proposal that will help consolidate your debts into one manageable monthly payment.
3. Stick to Your Plan
Whether you create a budget or file a consumer proposal, you need to stick to your plan!
This is especially important if you choose a debt management option that requires you to pay monthly minimal payments – failing to do so will further damage your credit and make it more difficult to get out of debt.
Remember that getting out of debt can be a long process, so don’t commit to an unrealistic plan that doesn’t work with your unique situation.
If you find you can’t make the payments set out in your plan, speak to your credit counselor about alternative arrangements.
4. Stretch Your Money
When you’re paying out extra money on a consumer proposal or trying to follow a budget to pay down your debt, you’re going to need to look at your flexible expenses to see where you can save money.
You can definitely save money when it comes to things like gas, groceries, and other expenses.
You can do simple things like plan your meals for the week and shop sales in the grocery stores. You can adjust your thermostat to save money on your energy bill.
You can also opt to walk to nearby places instead of driving to save on gas.
There are many ways you can stretch your money in order to tackle your debt. It just takes commitment and willpower!
As far as things like mortgages and insurance go, you can always talk to your mortgage lender and insurance providers to see if there are any solutions to reduce these costs.
If you owe taxes, you can always seek Canadian tax information and ways to reduce your tax debt.
5. Plan for the Future
Just because you’re tackling today’s debt doesn’t mean you can’t think of your future financial health!
Once you’re on track with your budget or debt management strategy, you should begin preparing for the future, such as starting an emergency saving fund.
In many cases, Canadians find themselves in debt because of financial emergencies. They rely on credit cards and loans to cover unexpected expenses.
Even if you are working on paying down your debt, now is the time to start saving for emergencies.
While they say you should save the equivalent of 3-6 months’ worth of your regular expenses, setting a smaller goal is still reasonable.
You can start with a smaller amount, like $20 per paycheque, and increase it as your income increases or your expenses decrease.
Moving Forward and Conquering Your Debt!
Now that you know what you can do to get out of debt in Canada, it’s time to put your plan into action!
Create your budget, explore your debt management options, stretch your money, plan for the future, and stick to your plan.
It’s time to confront your debt head-on and begin your journey to good financial health and independence.