Categorized | Finance

5 debt-tackling strategies

Posted on 07 April 2016 by admin

Whether you’re losing sleep over exploding bills or simply looking to stop depleting your savings account, here are some strategies to consider:

Go to someone in the know

Seek advice from financial professionals who specialize in debt management. If they’re simply recommending another way to consolidate debt rather than a process to repay it, that won’t help you in the long run. Push back for other solutions or go elsewhere.

Unify your debt

It sounds simple, but putting your debt in as few accounts as possible will give you a better handle on where your money goes. Don’t get too distracted by low initial interest rates without looking at total interest costs. The better organized your debt and the faster you repay principal, the less total interest you’ll pay.

Keep track of where the money goes

Take the time to track your expenses every week or month (there are several free online programs that can help) to figure out exactly where your money is going and where you could be cutting back. Meridian Credit Union’s Paul Shelestowsky tells all his clients to do this regardless of age. “It’s a lot harder to get in over your head when you’re tracking your money day in and day out,” he says. “Then you can develop a realistic budget to meet your goals.”

Change your spending patterns

You can organize your debt load perfectly, but if you’re not changing the way you spend, you’ll just end up with a different colour of debt, says MoneyFinder CEO Stephanie Holmes-Winton. She suggests creating a cash-flow plan that puts a dollar limit on high-risk expenses, such as credit-card purchases for non-essentials. The advisors she trains help clients find an average of $3,300 a month in spending that they didn’t know they could control. You can also set up your bank account to automatically pay everything from property taxes and utility bills to credit-card balances, which will prevent you from falling behind on payments and facing ballooning balances due to interest charges.

Don’t stop saving

A good financial plan should include contributing to debt repayment and savings simultaneously. Cutting back on long-term investments for a while to tackle debt makes sense, but putting money aside for unforeseen emergencies is essential too. “People who put all their efforts into paying debt tend to bail on themselves when they hit an emergency,” Holmes-Winton says. “They think they have no control and give up altogether.” Having an emergency fund also prevents you from having to dip into your retirement savings during a crisis.

Leave a Reply

Advertise Here
Advertise Here