Time to get a handle on your household debt!
Is your household debt creeping up on you? Debt levels in Canada continue to rise, and facing your financial obligations can be intimidating. However, spring is the season of fresh beginnings, so it’s time to tackle your debt and clean up your finances! For many people, the hardest part is simply knowing where to begin. While everybody’s financial situation is unique, there are some common best practices we can all follow. Here’s what you need to know as you prepare to take back control of your money!
Always make your payments on time
Falling behind on payments is a common reason people find themselves sinking deeper into debt. Once you miss a few payments, the penalties and interest can add up and make it harder to catch up again. If this is something you struggle with, the first step towards getting a handle on household debt is to make this issue a priority. Sometimes, the reason for late or missed payments is simply due to forgetfulness. If this sounds like you, consider adding in some method of reminding yourself when payments are due. This could be written notes, calendar reminders, or even setting up auto payments. This removes the need for you to actively pay your bills. If your late payments are more because of stretched finances, it’s most important to make the minimum payment on all your debts, rather than large payments on a select few. It is better to keep up with all of your debts, even if it means paying them off more slowly, than paying off some debts early and neglecting others. The penalties that come with this can be very costly, which will only exacerbate your debt issues.
Test out a budgeting app
Another great way to manage your household debt is to install a budgeting app on your phone. These apps can be super handy, and they are like having your bank account and finances at your fingertips, all in one place. Different apps use different methods of operating, but the goal of each app is to help you better control your money. They allow you to set spending limits and saving targets, directly pay bills, receive reminders of upcoming due dates, and much more. You can customize your preferences and situation to create a profile that reflects your needs and wants. There are several apps out there for you to choose from, so we recommend taking some time to research different options to find one that looks appealing to you! Having your finances clearly displayed on an app can simplify your budgeting, keep you up to date on your current situation, and allow you to handle debt most effectively.
Don’t take on new debts
As you are working hard towards clearing out your existing debts, it’s best to avoid new debts as much as possible. You don’t want to add onto your debt load, which could put your finances at risk and interfere with your budgeting and payment strategies. The more debts you have, the more lenders you owe money to and the more interest you owe. Try to limit this as much as you can. Delay expensive purchases such as a new car, and don’t take out new credit cards that will tempt you to spend more money. It is all too easy to pile on debt these days, but do your best to focus on your current obligations before taking on anything new.
Should you consider debt consolidation?
If your household debt is overwhelming and you are feeling stuck on your next steps, it might be time to think about debt consolidation. This is a process that takes all of your existing debts, and rolls them into one lump sum. Each month, you will make one payment that addresses each of your debts, all at the same interest rate. This removes the need to pay multiple lenders at several different interest rates. Debt consolidation does not take your debt away, but it sets you up with a simpler method of paying. Plus, if you have good credit, you will likely be able to secure a good rate that might be lower than some of your current rates. Debt consolidation is a more serious step than those listed above, and people generally use it when they require more direct action to address their debt levels. It’s very important to consult with your mortgage broker before making any concrete decisions on this path. We can examine your situation thoroughly and explore all of your options before settling on the best one!
Household debt, and debt in general, can feel stressful to handle. The costs of living are high, and life simply feels more expensive for many people today. The good news is there are always steps you can take to get a handle on your debts. Your first step should be reaching out to a mortgage broker to discuss your finances! We are here to help you get back on track so you can manage your money with confidence.
If you have any questions about your mortgage, get in touch!
