Tips to help you get out of Debt in 2013

As we roll into a fresh new year we all share the same desire for a fresh start.  Your goals may include a gym membership, a career change, a new residence or finally getting out of debt.   After the holiday season the goal of getting out of debt may be a common one.  In fact, according to a recent CIBC poll, Canadians main financial priority in 2013 is paying down debt.  The poll found that more of us are focused on paying down outstanding debts rather than on retirement planning or saving.

Top financial priorities in 2013 (by region):

To help you getting started on balancing a proper budget and reducing your personal debt load, we’ve come up with the following tips:

 Make a list of your Debts

Gather all of your credit card bills, your mortgage and any loan statements (don’t forget your auto loans).  Make a list of all your debts.  Setting up an excel spreadsheet is a good option so you can make changes when needed.  Make sure to include your monthly payments on this list to keep track of your spending.  By making this list you’ll have a good picture of how much you owe and how many debts you have.  Another good tip is to divide your debts into two categories: Secured debt and unsecured debt.  Secured debt includes anything debt that is backed or secured by collateral to reduce the risk associated with lending.  An example would be a mortgage, your house is considered collateral towards the debt.  Unsecured debt is any type of debt that is not secured by collateral, like credit card debt or line of credit loan.

Balance your Budget

Now that you have an accurate picture of how much you owe, you need to make sure you do not continue to build on your debt by overspending.  Your budget should show what is left in your pocket once you deduct your expenses and debts from your total income.  Consider the expenses you can remove to find more income to help pay off your debt.  Every penny counts so if you can shave a bit off your monthly cable bill or forgo buying your lunch every day you’ll be amazed at much you can save.

Find more Income

Find an opportunity to earn more income whether it is from asking for a raise, earning overtime pay, finding a higher paying job or taking on some weekend work.  If you can put more towards paying off your debt, you’ll be able to pay it off much faster than continuing making only minimum payments.

Find ways to Save

As a consumer you need to ensure you’re getting the best bang for your buck.  Take a look at your phone and cable bills to see how much you can save with bundled service packages.  Consider your hydro bills and make the effort to do your laundry in the evenings or on the weekends when the rate is lower.   Don’t forget coupon cutting and seeking deals online are great ways to save a few bucks.

Pay more than the minimum payment

If you continue to only pay the minimum payment on your bills it will take you years upon years to pay off the full balance.  For example, for a $10,000 debt with an interest rate of 19%, you will end up paying $10,834.16 in interest alone by only making the minimum payments.  If you add this interest to your original balance, you’ll find yourself paying a total of $20,834.16!  Not to mention that it will take you 258 months to pay this total.  A clearly better strategy is to pay MORE than the minimum payment each month.  If you cut your expenses or find some extra income, you’ll have the money to put towards your debt.

If you practice these tips and still find yourself struggling to pay off your debt, it’s time to consider seeking professional debt relief.  There are many options available to consumers however one will fit your life better than others.  If you would like more information about what debt relief option is best for you, give OCCA Consumer Debt Relief a call for a free financial assessment.  A conversation with us may change your life.

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