Getting Out Of Debt Takes Planning And Discipline

Whether we’re financing monster homes, shiny new cars or exotic vacations, the statistics say Canadian households are up to their eyeballs in debt. So what’s a super spendthrift to do?

According to Gail Vaz-Oxlade, borrowers need to consider more than the lowest interest rate. Consider your personal discipline level. For the highly regimented, that means a line of credit as rates are low and there’s flexibility in paying it back. For those impulse buyers, fixed personal loans are best because paybacks can’t be dithered with.

When it comes to managing your debt, take the football approach. You need to tackle it. Go after high-interest loans such as credit cards first and be diligent about mowing those down.

Figure out who you owe money to and how much. Believe it or not, some people prefer to keep their head in the sand when it comes to paying the piper. Or perhaps they owe so many different credit cards and banks that they can’t keep track. Try using a calendar on your computer or mobile device. Set an alert a few days ahead to notify you that a payment is due.

Try not to miss payments. That affects your credit rating and makes catching up on debt repayment all the more difficult.

Work on building an emergency fund. Everyone needs one for those for, well, emergencies. If you don’t have one to dip into, you will likely go further into debt.

Finally, set up a monthly budget. This lets you see if you have enough money to cover your debts and to live. It gives you the heads up that you may need to take action if you don’t have enough money to back down your debt. If there’s money left over, earmark for debt repayment.

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Eliminating Debt Strategy – Get Rich Slowly

Saving Money

Turning consumer debt into long-term savings is doable.

A lingering credit card balance is costing you money each month when it’s not paid in full. So, it might be worth borrowing from the bank to buy enough RRSPs to generate a tax return that will pay off that credit card debt.

Sure you have the monthly loan payment on the RRSP debt to cover but the interest rate on a bank loan is typically significantly lower than a credit card’s, and those RRSP investments are making you money over the long term. Unpaid credit card debts instead ding you over the long term.

There are plenty of online tools to help you figure out how much in RRSPs you’d need to borrow to generate a refund large enough to wipe out a credit card debt.
But be sure to only borrow as much as you can manage to pay off in a short time and live within your means learning to pay off your credit card in full each month so that you aren’t left with an RRSP loan to pay, as well as a newly accumulating consumer debt.,

And when the debt of the credit card is paid off, as well as the RRSP loan, consider setting up a monthly contribution to your RRSP because that bank loan has already instilled a habit of dedicating money in your monthly budget toward long-term savings.

For example, if you were paying $400 each month to pay off that RRSP loan to the bank over the past two years, when the debt is wiped out turn that loan repayment money of $400 into an investment builder. You’re already in the habit of budgeting for that every month.

Other ways to reduce debt is to transfer it to a lower-interest card. You’ll pay off more of the bulk of the money owed faster.

You can also convert non-deductible debt into deductible debt. In some cases those with an investment portfolio as big as their mortgage, for example, can sell off the investments, pay the mortgage and then set up a line of credit to buy investments. The benefit is that the interest you are paying on the line of credit would become a tax-deductible expense.

See what’s for sale in your neighbourhood – Do a quick search

Do a Quick Home Market Evaluation and see how much your home would sell in today’s market

Thank-you for reading our article about Eliminating Debt Strategy, contact us if you need anything or leave us a comment below.