Over time, it is easy to get into debt. Loans are needed, credit cards are required in order to make specific purchases, and other types of credit are necessary in order to reach certain goals. When that debt becomes too much, a solution is needed to avoid having lifelong financial issues.
It is unusual for the amount of debt that an individual has to decrease from year-to-year. Instead, it increases until it has the potential to become a mountain that cannot be climbed easily. For some, they are unable to climb the mountain at all and that means using credit cards to pay other bills. Before long, there is no more credit to use to pay those bills and the late fees start to accumulate.
Statistics Canada, based out of Vancouver, states that the debt levels of Canadians have reached a record high and much of it is credit card debt. The average debt-to-income ratio for each household has them in debt over 50% more than what they make. Basically a person making $50,000 per year can easily be in debt by up to $80,000 or more.
Part of the reason behind this debt issue is how easily credit can be accessed. Add this to the propensity of some Canadians to spend despite consequences and therein lies the debt problem. Even though the burden continues to grow, some Canadians open more credit accounts to cushion the blow. Eventually, they have overextended themselves and cannot obtain additional credit.
If you have reached the point in which you cannot acquire any more credit or you do not ever want to reach that point by getting your debt under control now, there is a lot of buckling down to do. You will have to prioritize and commit to getting your debt under control, which can be done by doing the following.
Consider Your Financial Goals
The first thing you want to do is consider your financial goals. Ask yourself why you want to pay down your debt. Perhaps you just want to stop worrying about how you are going to pay your bills. Maybe you have a major life change coming up, such as marriage or a new baby on the way. Not having to contend with debt can make life easier to navigate through. Any goals that you may have that involve money are more attainable when money is not tied up in debt. Once you see the light at the end of the tunnel, you will be glad that you made the decision to get out of debt.
Stop Being In Denial
If you're like many people, the bills come through the mail and you put them in a pile of unopened statements. You don't want to see the balances, the minimum payment amounts, and you just don't want to think about it. Now it's time to step into gear and start opening the mail so that you can add up the amount of debt you have and the interest you are paying creditors to have the credit they have extended to you. If you know how much each creditor is costing you and how much you owe them, you can create a realistic plan to pay them off.
Patch The Open Wound
You cannot eliminate your debt if you keep all of your credit cards in your wallet to be used the moment you feel like it. Aside from cutting up the cards, make them difficult to get to. Fill up a plastic bag with water, insert your cards, and put them in the freezer. By the time they have thawed out or you chip through the ice, the need to use them may have passed. You do not want to cut them up because you might need to rent a car or buy a plane ticket. There are some things that you need credit cards for, but the right move is to pay off the balance as soon as possible after the charge has been made.
Create A Schedule
Create a payment schedule for bills. It is ideal to pay bills twice per month. Payments can be planned in accordance with paydays. The idea, however, is to allocate these payments so that one paycheck is not being completely consumed by bill payments. Instead, start out slow and easy so that you are not going broke immediately. This will make paying down debt much more bearable. Those that try to start too fast by paying every extra cent they have into their debt are those that give up early in the game because they are tired of going broke. If due dates are too close together, talk to your creditors about changing due dates so that they are spread out.
Show Some Favoritism
It is time to stop paying just the minimum payments. So much of a minimum payment goes toward interest that very little is left to go toward the principal. This means it can take a decade or more to pay off a credit card if the balance is high enough. Go ahead and pay minimum payments on all of your cards, but choose one card and make a commitment to pay it off before attempting to pay off the others. It is best to choose the card with the highest interest since it is the one costing you more. After it is paid off, you can move to the next highest interest account you have, whether it is a credit card or another credit account.
Watch The Numbers Fall
Keep all of your statements so that you can compare the new ones with the old ones. It can be very motivating to watch the balances fall. This will help you stay on track until you start seeing a 0 under the balance section of your statements.
Getting debt under control now means not having to worry about going bankrupt. You won't have so much of your money tied up in credit cards, loans, and other accounts. In fact, you will be more able to take care of emergency situations that require money to take care of them. You can even go on vacation and not worry about how much more you are going to drive up your debt or if you will have enough money to make it home. All in all, paying down debt lifts an incredible weight off of your shoulders.
When debt is under control, other financial goals can be met. Such goals include buying a home, a car, and so much more. The important thing is to always have a plan that makes it easier for you to pay down debt as you get it so that you do not find yourself in a bind again. When you have a plan, you can live comfortably.