For many, one resolution should focus on debt. Managing debt is the single most important financial issue many Canadians face.
It’s hard to break bad habits. Every year the majority of people who make New Year’s resolutions fail to achieve them. If you’ve struggled with a debt resolution in the past, break it into manageable chunks.
1 Stop using debt
Resist the urge to buy stuff you don’t need. Your car might still be good for another year. And do you really need a new smart phone?
Pay with cash instead of credit. Studies show people spend less when they pay with cash. Handing over cash makes you think of the cost of an item more than when using a credit card.
2 Reorganize debt
The interest rate on an overdue credit card can be in the area of 20 per cent annually.
Consider using a line of credit on your home to pay off credit card debt. A line of credit can cost well under 5 per cent annually.
Please be aware if you transfer debt from your credit card to free up your ability to spend more on credit, it will only add to your debt woes.
3 Develop a plan to pay off debt
How much of your monthly cash flow can be directed to reducing debt? Set goals, write them down and then start. Discussing your debt reduction strategy with someone can help you be accountable. Perhaps that person will be trying to manage their debt also.
Now, let’s look at the business of debt
Banks and financial companies make billions of dollars annually by charging consumers interest on outstanding loans. It’s highly profitable for them to entice you to overspend on things you don’t need.
Non-payment of debt brings consequences. The financial institution will start collection proceedings which can include garnishing wages, repossessing cars and taking ownership of homes.
New Year’s Day brings with it the optimism of fresh beginnings. Welcome in 2019 by taking manageable steps to control your debt.