March marks the month associated with Basketball (March Madness finals) and the month when we prepare our taxes, purchase RRSP’s and take stock of how we are doing financially. Since you started this year, how do you stand financially? Are you living on a reasonable budget? Have you curbed your spending since the holiday season? Are you working towards paying off your debt?
Many Canadians can happily say YES to all the questions above, and to them I say CONGRATS! To the others who cannot say yes to at least two of the questions, I offer you some suggestions. Don’t worry, the majority of Canadians still don’t live by a proper budget and continue to spend beyond their means. With a current debt to income ratio percentage of 164%, it’s clear we need a refresher course on managing personal finance.
We’ve blogged tips on how to build a budget, how to control overspending and what options consumers have to resolve debt, but here are some “refresher” guidelines to live by that will help you get back on track:
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. Perhaps you expect to receive some money back from income taxes. 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 start using these guidelines now you can exit March with a renewed strength and vigor to stay on track with your finances. Ever heard the phrase, “March goes in like a lion and out like a lamb”? Make your financial trouble do just that. Enter your next month in control. If you need some assistance in doing so there are many tools to help including our online budget planner and credit card repayment calculator.
OCCA Consumer Debt Relief has been successful in helping Canadians resolve their debt and take back control of their finances. Our counselors are experts and offer debt solutions that are reasonable and affordable to consumers. If you are having debt trouble and don’t know how to get out, give us a call or visit us online. We offer a free financial assessment. Let us help you get back on track.
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