Necessary Information When Planning to Be Debt-Free

One of the most important issues a person can face is finding themselves buried in debt. It can seem overwhelming to get out of debt in Canada, but the right plan can set things straight. After all, being ready is crucial in any situation.

Several methods can be done in order to clear out debt. Being prepared is necessary for such an endeavour. Thankfully, there are a number of personal debt solutions in Canada. Read on for ideal steps the average person can take:

Budget Everything

Checking on financial key factors can make a huge impact on managing debt. How much money is coming in through a salary? What are the existing regular expenses (both personal and for the home)? Knowing how much there is to work with can make all the difference. It will also paint a clear picture of the best route to take with regards to spending versus saving towards one’s financial goals.

Set a Clear Timeline

The process of repayment must include a schedule. It should be well within the means of the person in debt. Striking a balance between affordability and being reasonable is crucial. 

Timing is everything; when a payment period is too short, keeping up can get tough. However, a prolonged payment period could lead to a loss of focus. A good rule of thumb throughout this is to remember that monthly payments can increase if the interest rates do.

Prioritize Debts Accordingly

It’s crucial to take note of debts that will likely need to get paid first. This includes debts whose interest rates are higher than the rest, such as payday loans. That’s an excellent way to clear out debt quickly. Put minimum payments towards all debts. Any money that’s leftover or in excess from that is best used to further pay down debts with the highest interest rate. 

Starting from the higher interest rate debts, list everything in sequential order until the ones with the lowest interest rate. Payday loans and credit cards are usually the key suspects of this. 

There may be a tendency to think paying off the lowest balance debts is best. Feeling accomplished about paying a debt off can be motivating, after all. It should be noted that in the long run, however, this can cost more interest.

Take Stock of All Debt

It’s one thing to have an idea of debt owed as a total figure. However, breaking that down will prove to be much more helpful. Write (or type) a comprehensive list of all existing debt. Ensure that the following are included with each item on the list:

• Total Amount Owed
• Minimum Payment Per Month
• Interest Rate

Things on that list can include, but should not be limited to:

• Buy Now, Pay Later Balances
• Car Loans
• Child Support 
• Credit Card Balances
• Line of Credit Balances
• Loans from Family and Friends
• Mortgages
• Payday Loans
• Spousal Support
• Student Loans
• Taxes Owed
• Unpaid Utility Bills (Cable, Cell Phone, Water, and the like)

Conclusion

Debt is a rather heavy financial issue for anyone, but getting out of it is possible with the right approach. Preparation is key through steps such as taking stock of all debt, setting a clear timeline, and prioritizing debts accordingly.

Wondering how to get out of debt? Mississauga-based DebtHelpers.ca offers a range of consulting services and debt solutions designed to help Canadians stay on top of their finances. Reach out today!