how to get out of debt

How to Get Out of Debt: 15 Ways You Can Do Today

  • By Jillian Taylor-Mancusi, LIT

If your debt has gotten out of control, you’re not alone—the average Canadian is shouldering over $23,800 in debt, not including mortgages. Their total debt to income ratio is 158%. That may seem like a lot, but you can make a big dent in your debt by making debt reduction a priority.

Here are 15 ways to start reducing your debt today:

1) Make a budget and stick to it. This is the most important thing you can do to reduce both debt and the stress that comes with that debt. It will let you see where your money is going each month while helping you cut back on expenses and allocate funds towards debt reduction. Here are the steps to setting up a budget:

  • Keep track of your income and expenses for a couple of months in order to have the information you need to develop a budget that makes sense for you and your family.
  • Start to use that budget to help you make spending decisions.
  • After a few months, review the budget to see if it is working for you. You may need to make some minor adjustments. That’s OK. Better a budget that you can achieve than one that you ignore.
  • Review your budget annually and make adjustments for any changes in your situation. As time goes on, things come up — another child, decreased or increased income, etc. You will need to adjust your budget to reflect those things. A budget that is reviewed regularly is the key to getting a handle on debt.

2) Get rid of your credit cards. You don’t have to close your accounts unless you have more than you need or some with exorbitant interest rates, but cutting up or at least hiding your credit cards can help eliminate the temptation to add to your debt.

3) Make a plan. A wise man once said, “A goal without a plan is just a wish.” Make a solid debt reduction plan with deadlines. Post it where you can see it. Review it monthly and make updates so that you can see the progress you are making.

4) Put spare change towards debt reduction. Dust off your piggy bank or find a really neat jar or box that you like the look of, and start depositing spare change into it. At the end of each month, deposit that change at the bank and use the money to pay down your credit cards or the overdraft in your bank account.

5) Sell extra things around the house. You may have items around the house that are virtually as good as new, but rarely if ever used — like that slow cooker that you thought you’d use, but after the first time, it has gathered dust in the back corner of the cupboard. Take items like that and put them in a garage sale, or sell them online. Put the proceeds towards your debt.

6) Put gifts and windfalls towards debt reduction. Birthday and Christmas gifts, tax refunds, bonuses, and other windfalls that are not part of your monthly budget, are easy ways to give your debt reduction a boost almost overnight.

7) Get a second job. If you’re really serious about debt reduction, consider a part-time or weekend job. It doesn’t have to be permanent, and even working just a few hours a week can help you pay off debt quickly. If you do this, however, you should be sure to dedicate the earnings entirely to debt repayment. Otherwise, you risk increasing your income, increasing your standard of living with that additional income, and making it virtually impossible to live without it. If at some point, the second job becomes too much for you to maintain, you need to be able to walk away without seriously impacting your monthly budget.

8) Pay more than the minimum amount each month. Pay as much as you can possibly afford to pay towards debt each month. Your budget will help you to determine if you have extra to pay.

9) See how much you can slash your grocery bill. Once you have a realistic budget for food, try shopping sales and coupons, and eliminating eating out, then put the amount you have saved into debt reduction. For example, if your food budget is $400, and you manage to spend only $350, put the $50 saved into debt reduction.

10) Negotiate. Contact your creditors to try and work out lower interest rates. Just be careful not to give a lot of personal information to them such as where your bank, your account number, or where your spouse works. Some unscrupulous creditors may use that information to take collection practices up a notch.

11) Focus on one debt at a time. Whether it’s your highest-interest debt, your smallest or your highest balance, this will help you focus your efforts and see faster results.

12) Look for creative ways to save money. Making gifts instead of buying them, using exercise DVDs instead of paying for a gym membership, and carpooling to save on gas are a few easy ways to save money that can be used towards debt.

13) Don’t open up new lines of credit. As tempting as it may be to save 15% on your purchase by opening up a store credit card, don’t do it. This will only increase your debt, and further damage your credit rating.

14) Budget for debt reduction. Include some funds from your budget each month for debt reduction. This is a great habit to get into, and one that will serve you well once you have your debt under control. You will be able to use the same practice to save for big purchases, like furniture or a car.

15) Get professional help if needed. Sometimes, even the best efforts aren’t enough if your debt is out of control. Don’t wait to seek help. If your debt is so substantial you can’t possibly tackle it on your own, a Licensed Insolvency Trustee can help you find the best solution for your situation. Call LCTaylor today. We would be happy to sit down with you and discuss your options.

 

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Jillian Taylor-Mancusi, LIT

Jillian has worked in the insolvency field since 1992. She is a graduate of the University of Manitoba. She received her Insolvency Counselor’s Qualification Certificate from Ryerson Polytechnic University in 1998, and in 2007 she attained her license as a Licensed Insolvency Trustee. Jillian is a Read More Jillian has worked in the insolvency field since 1992. She is a graduate of the University of Manitoba. She received her Insolvency Counselor’s Qualification Certificate from Ryerson Polytechnic University in 1998, and in 2007 she attained her license as a Licensed Insolvency Trustee. Jillian is a member of the Canadian Association of Insolvency and Restructuring Professionals (CAIRP). She is Past President of the Manitoba Association of Insolvency and Restructuring Professionals (MAIRP). Jillian has held positions on the Armstrong Point Association, Executive of her local EDA Riding Association, Manitoba Highland Dance Association, and the Continuing Education Committee of CAIRP. Previously, Jillian was the Treasurer for the Parent Association at her daughter’s school. Currently, Jillian serves as the Chair for Dressage Winnipeg. Close

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