Paying off debt is an important step towards stress-free financial health. Here are a few tips to help you.
Take a moment to determine how much you’re paying in interest on your various sources of credit. Imagine if this amount went directly into a savings account! Print your recent statements, get out your coloured markers and categorize your expenses. It will surprise you to see how much you spend on certain expenses and where your money is going.
You might find it easy to create a budget, but do you actually respect it? To get on the right foot, be realistic and honest when creating your budget. If your budget is too restrictive and not adapted to your actual situation, you can bet that you’ll ditch it rather quickly. Do you enjoy eating out from time to time. Plan a realistic amount for this treat. However, keep in mind that you may have to cut other expenses. Take a minute at the end of each month to compare your estimated budget with your actual expenses. You’ll be able to see the differences and adjust your budget accordingly.
Come up with a game plan
At this step, a financial advisor can help you come up with a financial strategy. Now that you know your situation, establish your rules and their limits while remaining flexible. Identify concrete measures that you can take to limit your expenses. Consult your credit report, as your credit score greatly impacts your ability to borrow money for a project, like buying property. This can motivate you to improve your indebtedness.
Get rid of shame
Many people think talking about finances and debt is taboo. While it’s sometimes difficult to discuss these topics, starting the conversation with your spouse and close friends will help you see that you’re not alone. Also, you can discuss your projects with them in a positive light and create new habits to help you save.
Change your social events
If you brunch with your best friend every Sunday, why not buy some fruit and pastries at the store and have a morning picnic in the park? Replace certain expensive outings with free activities, like enjoying nature with your loved ones. Your wallet will thank you AND you’ll have fun!
Prioritize: pay off your debts with the highest interest rates
Credit can help you reach your goals, provided that it’s used properly. It becomes a problem when you’re unable to repay your debts. Between your credit card, which has a high interest rate, and your student loan, which has a lower interest rate, focus on paying back the debt with the higher interest rate first. Paying the total amount on your credit card statement every month will help you avoid paying interest. If you can’t, pay off your credit cards as quickly as possible. Obviously, making the minimum payment on all your debts is essential.
Create other sources of income
There are several ways to increase your income in the short term: renting your home while you’re on vacation, freelancing (if your profession allows for it), selling items you no longer use, etc. Put this additional income toward paying down your debts.
This post was originally posted on the Investia Financial Services Inc. blog, the original post can be found here.
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