Tackling Your Debt Resolution
Knocking down debt levels often leads the list of New Year’s resolutions for maxed-out Canadians (according to an annual survey by Angus Reid conducted in 2016). But where to start…
(A) Make BILL PAYMENTS on EVERY PAY DAY:
Most bills have a monthly due date but if you get paid every two weeks, pay 1/2 your bill payments every two weeks too! Your payments will feel more reasonable, chances of missing a payment will be reduced, and you’ll pay off your bigger ticket items (ie: vehicle(s), mortgage, etc) faster.
AND the faster you pay off debt, the less interest you pay so win, win!
To make this step even easier, set up automatic bill payments. I’m a big fan of the “Set It & Forget It” philosophy.
(B) Try DEBT STACKING:
- Make a list of all your debts (excluding your mortgage);
- Sort them according to interest rate with the higher interest on top;
- Make minimum payments on all your debts but make an extra payment on the one with the highest interest rate;
- THEN, when that first debt is paid off, add the payment you were making on it to the next debt down the list!
(C) If you think you might need the encouragement of seeing small successes faster to keep you motivated, try “SNOWBALLING” YOUR DEBT:
- Make a list of all your debts (excluding your mortgage);
- Sort them according to balance with the smallest balance on top;
- Make minimum payments on all your debts but make an extra payment on the one with the smallest balance;
- THEN, when that first debt is paid off, add the payment you were making on it to the next debt down the list!
(D) CHANGE your DEBT STRUCTURE – Lower the total interest you pay on existing revolving credit accounts and high interest loans by either refinancing your mortgage OR getting a lower interest loan and paying off all your high interest debt!
Most of today’s credit cards and private loans come with high interest rates and unless you pay more than the minimum monthly payment amounts, the amount paid out in interest can be significant.
A great way to combat this is by refinancing your mortgage to include your credit card debts (recall my September 2015 newsletter). Another great option is by obtaining a low interest loan, paying off all your high interest credit card debts, and focusing on paying down the new loan with its lower interest payments.
Keeping New Year’s Resolutions are hard but the best way to start is TO START! If you want to further discuss your debt resolution options, or have any mortgage obtaining or maintaining questions, please contact me and I’d be happy to help!
minnja 