How to Put Your New Year’s Debt Relief Plan Into ActionJan 31, 2018
Did you know? Debt relief is the top financial goal for Canadians at this time of year, but most have trouble implementing and sticking to their goals.
Have you made a promise to yourself to deal with your debt this year? An important first step in successfully paying down (or paying off) your debt is to find what motivates you. You might want to save for a house, travel, put money aside for your kids’ education — whatever your reason, let that be the fire that keeps you going.
Next you need a solid plan. Below, we will discuss how to create a debt relief plan that works for your lifestyle and keeps you motivated all year long.
First things first…
You’re ready to pay off that nagging debt. Great! Here’s where to start:
- Calculate all your outstanding consumer debt, loans and lines of credit. This online debt calculator makes it easy.
- Calculate the interest rates of all your loans from highest to lowest and write them down.
- Figure out a REALISTIC timeframe for how long it will take to pay down your debt. Don’t be intimidated! Use this module to see how to set realistic financial expectations.
Time for action!
Once you know exactly what you owe, you’re ready to make a plan. Don’t be daunted by the numbers. You’re taking the first steps in your journey toward a debt-free life. Pat yourself on the back! Here are your next steps:
- Make a detailed budget. Without a budget, you’ll be left wondering where your money goes each month and how much you have to pay down debt. Your budget should include ALL monthly expenses. Use this worksheet as a guide.
- Put all extra money toward debt. Whatever is left over after your budgeted expenses and necessary savings should be assigned to debt repayment. To really make a dent, you’ll need to pay more than the minimum or interest-only payments. Alternately, you can maintain the minimum payments on all debts while assigning a larger amount to your highest-interest credit card.
- Don’t forget to save. An important part of living a debt-free lifestyle is having a safety net. An emergency fund which covers three to six months of your expenses will cushion you, without turning to debt, during unexpected financial situations.
- Stay motivated! Set goals for yourself so you can meet your debt repayment milestones. Celebrate each time you pay off a credit card by giving yourself a reward. Online tools can be an excellent resource when navigating your finances.
Use the Financial Consumer Agency of Canada’s Financial Toolkit to keep your goals front and center. Another way to keep your eye on your goals is to surround yourself with like-minded people. Follow Michelle Summerfield’s blog, The Classy, Simple life for money motivation.
Listen to our latest podcast, Practical Ways to Change Your Debt Mindset, for even more advice and tips from our Licensed Insolvency Trustees.