With debt at an all-time high, many North American households are turning to bankruptcy as a last resort. The economic downturn has made many homeowners feel helpless and powerless. As a result, low interest credit cards have been maxed out, mortgage payments have been missed and paycheques are never enough. Thankfully, with a bit of planning and self-discipline, you can be on the road to debt-free living, without having to claim bankruptcy or even get involved with a debt consolidation company. Here are some practical tips.
Amber Tate is a professional blogger who writes for a myriad of publications in the insurance industry. She has recently renewed her life insurance policy, which has saved over $200 a year.
- Keep track of your expenses for one month: For one full month, write down every single penny you spend; this includes coffee on the way to work, gas, gift cards, the coffee fund at the office; don’t miss a single penny.
- List what’s coming in and what’s going out: At the end of the month, list all of your expenses, and all of your income. Include inheritance money, dividend income, trusts, etc. You should have two columns: Income and Expenses.
- Start with your most expensive debt first (i.e. highest interest rate): Usually, your credit card will have the highest interest rate, and therefore is the most expensive. To start, pay the minimum payments on all your debt, and put an extra $25 or $50 on your most expensive debt. Keep doing that until that credit card is paid off.
- Then go to the next one: Let’s say you were putting $50 extra plush $20 minimum payment on that first card; now that it is paid off, take that $70 and put it towards the next highest debt; and so on and so forth, until you have eliminated all of your credit card debt. The key is to not use the cards while you are paying them off.
- Never spend more than you make: This is what gets people into so much debt. Do you really need those new shoes or that new necklace? Learn to save for what you want and pay cash.
- Keep credit cards for emergencies only: When your car breaks down, or you need a new furnace, you can use your credit card. When you use them for every day purchases, you will enter into a never-ending cycle of debt and despair.
- Build up your savings: Get into the habit of saving at least 10% of your income and putting into a savings account. This way, you’ll have a nest egg that you can choose to leave in the bank, use for your child’s education, or invest for a greater return.
Getting out of debt is not easy, and it will not happen overnight. You may even find that you need to increase your income by getting a second job, at least on a short-term basis in order to decrease your debt load. You will also need some self-discipline; leave your credit cards at home when you go shopping, and make a list when you go to the grocery store. You can save even more money by clipping coupons and buying in bulk.
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Amber Tate is a professional blogger who writes for a myriad of publications in the insurance industry. She has recently renewed her life insurance policy, which has saved her over $200 a year. Compare quotes today at Kanetix.ca!
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