Heres How to Manage Debt and Be Financially Independent-

October 27th, 2021
Heres How to Manage Debt and Be Financially Independent-

In Canada, it is not unusual for most people and households to have debt in many forms; personal loans, credit cards, car loans, mortgages, student loans, and the list goes on. In most cases, this is how life is for people in our society.

Acquiring possessions and property with loans and credit is easy, but when it's time to pay, it's not always as easy to meet the payment terms and obligations. Where this becomes an issue is when you find yourself in a world where your phone is ceaselessly ringing and there may even be knocks on your door as bank and lending company collectors are checking you out for the unsettled loan payments that have been long overdue

What is the best way to break the curse? Reach out to get debt counselling in London and keep reading to learn more helpful financial habits.

Create a Game Plan

Strategizing and setting financial goals is an effective way to pay off debt and is a must. Create a system that has an organized approach, and includes a contingency plan in case of emergencies. You must create a plan to eliminate the debt in full using real and realistic values. After mentally plotting the plan, write it on a piece of paper, a journal, or a digital notebook. It makes the goals and intentions more manageable, and it conditions the mind that this is important and urgent.

Set a Realistic Budget

The game plan should also include ways to control one's spending habits. Set a realistic monthly budget to manage spending patterns. Don't be too strict when creating a budget plan, and make sure that all the bills and necessities are covered. Do remember to set aside small amounts so you can treat yourself, too. Life is about balance and setting priorities.

Stop the Debt Train

Being debt-free is a big step, and it includes eliminating the use of additional credit and debt to fund living expenses. Using credit cards for purchase when you don’t have money can be problematic and get you into trouble. Using credit when you can pay it off immediately, can be a great tool. As a reminder, never use a credit card to pay off other debt as it usually creates a cash advance transaction.  It's adding fuel to the fire, and it will keep growing until the interest is out of hand.

Start Prioritizing

Paying off the smallest debts before the bigger ones isn’t always the best method. This is a myth that can do more harm for people who are trying to be debt-free. You will need to review and determine which strategy would work better for you. Aside from paying off the debt with the smallest limit out there, another popular strategy is to pay off the debts with the highest interest rates, then work on the others later. These two options are considered the Snowball and Avalanche method and should be explored when creating a debt repayment strategy. 

Don't 'Break the Glass'; Debt Is Not an Emergency

It is ideal to have an emergency fund. It is a person's soft place to land so that they can bounce back in case of health or household emergencies. And emergency funds shouldn't be spent on paying off debts. It is a grave mistake that some people make, leaving them cashless during crises and piling up even more debts. Emergency funds should be kept in your account for situations when you do not have income and this money will help you keep paying your living expenses during emergencies.

Quit Paying Only Your Minimum Payments When Dealing With Debt

Another bad habit that people must break is only paying the minimum monthly payment. Some people believe that doing this is the best way to pay off debt, despite not always understanding how much interest will continue to grow on outstanding balances.  If being debt-free is the goal, it is ideal to pay as much as possible every month while meeting all of your bill payments without missing any.  

Double Check the Statements

It is reasonable to be scared every time an email or envelope arrives containing bank statements. But don't put it off; seeing the numbers is an excellent reminder to grasp the situation, not let it get out of hand and create a plan to move forward.

Remember, companies are still vulnerable to inaccuracies. So it is best to double-check the statements to be aware of errors. These errors will only hurt you and not the companies who are reporting them. And if it happens, make sure to let the creditor know immediately.

Conclusion

Getting rid of financial stress is difficult but achievable. You don’t have to suffer financial difficulty alone or long term. Using strategies to manage your debts, including following some of the tips mentioned above, will help you lead a financially sound lifestyle.

Do you want to make better financial decisions but dont know where to start? If you want to review your options and learn about consolidation loans, debt management programs, credit counselling, proposals, consumer proposals and bankruptcies, we at Paul J. Pickering and Associates are here to help you, backed by over 30 years of experience in helping our clients resolve their financial problems. Let’s discuss the right plan for you!