How can I get out of debt?
12 proven debt elimination strategies.
A lot of people would love to get out of debt completely but aren’t quite sure on how to get started and go about it. There is no one solution that fits all. You need to follow an action plan that suits your financial situation and lifestyle. At the same time, the sooner you get started, the faster you can get out of debt.
Part of the solution is also learning new habits about how to manage finances on a day-to-day basis. Here are 12 debt elimination strategies to get you started.
- Pay the minimum – and then some.
If you only pay the minimum on your credit cards each month, it will take a very long time to pay off your balance. To get it done quickly, pay as much extra as you can afford. Even an extra $25 each month will help. Try using our FREE financial calculator to see how much you can afford to pay each month.
- Spend less every month.
Many people get into debt and stay in debt because they tend to buy what they want, when they want – and quite often their spending exceeds their income.
“As a rule, buy something only if you have the money. Track your expenses and try spending less each month. Once your debt is paid off, and you have started saving, you can then use the money towards other financial priorities”, says Jeffrey Schwartz, Executive Director, Consolidated Credit Counseling Services of Canada.
- Pay with cash.
A great way to get into the habit of spending less is to pay with cash rather than credit. According to the latest studies, people spend 15% more on event tickets, at vending machines and pretty much on everything when they swipe a credit card.
- Get rid of the most expensive debt – pay it off first.
A proven strategy to get out of debt is to isolate the one debt that charges the most interest and pay it off first. You can even make minimum payments on all of your other debts. Once the expensive debt is paid off, you can then focus on the next most expensive debt. Continue this method as you pay down each of your debts, and you will be left with your least expensive debt to pay down last.
- Consider selling off your second car.
Maybe you have a recreational vehicle or maybe you are a two-car household. Can you consider selling off the second car and try carpooling? Or use public transport? You could even save on insurance. You can always buy a similar vehicle again, once you have resolved your financial problems.
- Increase your income.
You can increase your income in multiple ways. Consider increasing the hours at work or taking on a part–time or second job. This is a common practice for many people who wish to get rid of debt faster. You could also rent out an additional room or storage space in the garage to generate extra income. Try doing it through Airbnb for quick results.
If you possess a skill or hobby like writing, you can capitalize on it through freelance writing. You could also check if filing taxes more clearly can help you receive assistance with premiums or government funds based on income levels, like GST refunds or child tax credits.
- Be more aware and track your spending habits.
Tracking your spending can help you identify possible ways to cut back and save money. Until you try, you will never know how much you can save. Now you can allocate the “money’ you found hidden, to pay off your debts.
- Explore consolidation loan options.
When you get a debt consolidation loan, it may reduce overall monthly debt payments by consolidating all loans into one single payment at a reduced interest rate. You must ensure that no additional credit is used until the loan is repaid in full.
- Refinance your mortgage.
If you own your own home, you may have enough equity to consolidate all of your debts into your mortgage. Your trained credit counsellor may be able to offer you unbiased advice on the best option going forward. If you do refinance your home and consolidate debts into your mortgage, you should think of the new mortgage like the debt consolidation loan discussed in the above point.
- Plan with a budget.
A budget is just an itemized spending plan that helps you straighten out many things and narrow down on your pressing debt payments. It may even help you discover that you actually spend a whole lot on dining out, recreation or entertainment. The new budget can now ensure that you spend less than you earn and accelerate your debt payments.
- Speak with a Credit Counsellor.
The sooner you start dealing with your debt, the sooner you’ll have it paid off. If you need some help getting started with a plan, or if you’re not sure if your budget is realistic, get in touch with a trained credit counsellor.
Getting help to stay out of debt is just a phone call away. Ready to get started? Get in touch with our trained credit counsellors at 1-888-294-3130 or contact us online through our online debt analysis and a counsellor will reach out to you shortly.