By Megan Martin ©2020 Postmedia Network Inc.
Canadians nationwide have a debt problem. In fact, according to Equifax, over the last several years both the number of people and the size of the debt itself have increased substantially.
The problem with debt is that it tends to have a spiral effect, where consumers can’t get ahead of what they owe and aren’t sure how to get out of debt fast, so their liability and financial insecurity continues to increase. But there are many ways in which consumers can help pull themselves out of debt and change their habits for good.
Here, we explore the top 7 ways that people can adopt to get out of debt.
1. Stop spending more than you earn
It may seem like a no-brainer, but many people struggle to get their spending under control. In fact, the majority of consumers don’t track their spending in a meaningful way and as a result don’t realize they’re spending more than they earn. A simple way to determine whether or not your spending is in line with your income is to go over your past banking and credit card statements to identify spending habits. Realizing where your money goes is the first step to figuring out how to get out of debt.
2. Build a budget
Once you know what you’re spending, it’s time to build a budget. Using your net income, begin identifying what your expenses are, recurring and otherwise, and allocate an appropriate amount of your income to cover them. This exercise can help you prioritize spending and more importantly, avoid overspending. Having a budget is also a tool to help make your spending more predictable so that you can avoid adding to your debt each month with unplanned purchases.
3. Prioritize your payments by eliminating the most expensive debt first
After your spending is under control and you can predictably set aside a certain amount of money each month to address your debt, it’s important to have a repayment plan. Financial advisers typically suggest prioritizing your debt by paying down the amounts owed that carry the highest interest rate. Ridding yourself of high interest debt as quickly as possible helps ensure that you’re minimizing the amount of interest you owe and avoiding the compounding effect, helping you get out of debt faster.
4. Pay more than the minimum payments on your debt owed
When you pay down your debt as quickly as possible, you’re reducing the principle amount owed as well as avoiding new interest charges. If your budget allows for it, accelerating your repayment is hugely helpful in stopping the cycle of debt because the longer it’s left unpaid, you begin owing interest on top of the previous month’s interest accrued, which can add up quickly.
5. Consider ways to increase your income
Making more money is easier said than done but looking for job opportunities that offer higher salaries is well worth exploring, given the health of the Canadian economy. The gig economy is also opening up opportunities to increase income through a wide array of side jobs. Maybe you’re a talented crafter and can sell your goods online, or perhaps you’re a wordsmith editing papers and documents for an hourly fee. No matter what your side hustle is, it’s never been easier to let your inner entrepreneur shine through and bump your income in the process.
6. Set aside a rainy-day fund
Once your proper planning and hard work begin paying off, you may be able to take a portion of your income left after expenses and debt repayment and enact a plan to establish a rainy-day fund. There are many ways to go about saving, but one of the easiest ways is to set up biweekly or monthly automatic transfers to a savings account. Having some cash set aside can help in the event of an emergency.
7. Have a backup plan for emergency expenses
No matter how carefully you plan out your spending and expenses and how devoted you are to pull yourself out of debt, the reality is that life happens. From car breakdowns to family emergencies, having a plan in place to deal with unexpected expenses is key.
iCASH is a trusted Canadian licensed direct lender that specializes in providing easy to access instant loans online. In fact, the paperless application process is so simple it can be done from your mobile device in a matter of minutes. These short term loans are ideal for unforeseen financial outlays and are available even to consumers with bad or no credit history.
As a responsible lender, iCASH ensures that clients are never lent more than their repayment capacity. They also don’t take personal belongings such as a car or home as a guarantee against the loan. What’s more, having a flexible repayment schedule means you can stick to the financial plan you’ve established for yourself while taking on emergency funding and not have to worry about ruining the progress you’ve made.
This story was created by Content Works, Postmedia’s commercial content division, on behalf of iCASH