5 Debt Relief Tips for 2017

2017-03-31 10:18:31

You don't have to transform your life into a minimalist one to experience debt relief. You just need to practice self-sacrifice, willpower and determination to be debt-free in 2017.

Debt is a massive problem in the Great White North. From British Columbia to Nova Scotia, millions of Canadians are facing enormous amounts of consumer debt. In fact, debt is sitting at a record high in Canada, and the smallest increase to interest rates could severely impact households everywhere. Is this why the Bank of Canada (BOC) is postponing the inevitable?

Credit cards, lines of credit, student debt, auto loans and mortgages are the top debt categories. Some of these were avoidable, while some of these were not. Either way, you're in the red.

Indeed, it can seem nearly impossible at first to pay off that $23,000 credit card bill. Does this mean you should immediately concede defeat and file for bankruptcy? Heck, no! It is inherent inside all of us to survive and thrive, and this can be felt by tackling your debts head on.

Here are five debt relief tips for 2017:

Get to Know Your Debt First

Once all of your debts have snowballed to become an avalanche, it can be pretty hard to know what exactly you owe and to whom. You lose track of your obligations and before you know it close to all of your income is being used to cover your debts.

It is important to evaluate your debts and find out your total outstanding balance.

Grab a cup of coffee, sit down at your dining room table and begin to calculate every debt. By having this information at hand, you can better grasp how you will pay off these burdens.

Preparing a Budget & Being Realistic

Are you one of the 40 percent of Canadian households that does not have a budget? Well, it is time to begin one, and be sure to be honest with your numbers – don't fudge the numbers.

Here is what your budget should consist of:

  • Your monthly income, tax rebates and supplemental earnings.
  • Your fixed and variable costs.
  • Your total debts to each lender.
  • Your leftover earnings.

Don't worry if these are estimates because if you're within 90 percent of your approximation then it will suffice. Also, if you have additional money at the end of the month, use it for your debt (see below).

Start to Aggressively Pay Off Your Debt

Many of your friends will suggest to you to take your time paying off your debt. They will use the excuse that interest rates are at historic lows so it doesn't make sense to sacrifice your lifestyle to pay off debts that have minuscule servicing costs.

Here is what is wrong with this line of thinking: first, it is never OK to be in debt. Second, servicing your debt is just throwing money out the window that could be better used for saving and investment. Third, what happens if the central bank announced next month it was putting forward a rate hike 25 basis points?

It is time to begin aggressively paying off your debt. Whenever you have leftover money, whenever you are given a bonus or a monetary gift or when you are earning additional income from that part-time job you've embarked upon, use any extra money to cover your debts.

Cut Back on the Nice-to-Haves

We all want to have Cadillac data plans, a monthly gym membership, the best cable television package and daily trips to the local coffee shop. You need to realize that these are not must-haves but rather nice-to-haves. In other words, you have to cut back on these spending habits.

The simple task to embrace is getting rid of your gym membership, cut the cord, reduce your smartphone data plans and bring coffee from home. By taking these simple steps, you will save a nice chunk of change at the end of each month.

Talk to a Credit Counseling Service

If your debt is overwhelming and nothing you do really seems to be helping, perhaps it is time to speak with a credit counseling service. These organizations will help you initiate debt negotiations, debt settlements or debt consolidation and ensure that you can lower your debts, get better interest rates and maybe even discharged from a debt from 10 years ago.

Final Thoughts

Debt can feel like a bag of bricks on your back and shackles chained to your ankles. Being in debt is one of the most horrendous feelings. Whenever you hear commercials of euphoric consumers being debt-free, they aren't exaggerating. That sigh of relief, skip in your step and big smile are all symptoms of being completely out of debt.

Yes, it takes hard work, sacrifice and displeasure, but this short-term pain will lead to long-term gain.

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