Quick tips to calculate and prioritize your debt

2020-09-30   minute read

Tara Silliker

Lifestyle Debt

Debt can feel overwhelming, and it can be difficult to keep track of everything. Especially as our lives get busier and we have more distractions grabbing at our attention. But it’s not impossible. Just a few small changes can add up quickly and help you get the upper hand.  Following are our top 10 quick tips for getting organized to defeat your debt.

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Know what you owe

Create a detailed and comprehensive list of all your debts. This should include:

  • The total amount owing on each debt
  • The monthly payment for each debt
  • The interest rates on each debt
  • The payment due date for each debt

Keep this list in a high traffic area that you’re likely to walk past several times per day. Update it every time something changes (e.g. you make a payment, a purchase, pay the debt off, etc.) and monitor your progress.

Pay the small ones off

Reducing your list of debts frees up income and makes things easier to manage. Pay off any debts less than $1,000 as soon as possible. That way you can focus your attention on the larger, longer-term debts that are really eating into your budget.

Mind your interest charges

Your debts with the highest interest rates are costing you the most money. Once you’ve gotten the little debts out of the way, focus your efforts toward paying down the most expensive debts first.

Review your expenses

Look for opportunities to free up more money for paying down debt. Shop around for better prices on recurring expenses like insurance, electricity, gas, internet, mobile phone, etc. If you do find a better deal, try to take it one step further by seeing if your current provider is willing to beat it to keep you.

Triage your spending

Review your non-essential recurring expenses, especially in the form of subscriptions (e.g. Netflix, Amazon, Spotify, Apple Music, etc.), apps, and memberships (gym, yoga, spin, etc.) and ask yourself the following questions:

  • Am I using the service / is the service delivering enough value to justify the cost?
  • Are any of these services redundant or unnecessary?
  • Are there other services available that offer better functionality at a better price?

It’s also worthwhile to review credit and debit transactions over the past month to make sure there aren’t any surprise subscriptions you signed up for and forgot about.

Make it a team effort

You and your spouse should speak openly with one another about your financial goals and other budgetary matters. But you can also get the kids involved.

  • Recruit younger children to help find and clip coupons
  • Pre-teen children can help cook dinner or organize a yard sale
  • Teenage and young adult children can get a part time job and be more involved with family budget planning

Plan ahead

Save for future purchases in advance. Don’t add to your debt when you’re working so hard to reduce it. 

Shop with purpose

Meticulously research and plan large purchases so you can prioritize what is most important to you and your family. Often this means buying within your means, rather than what’s in fashion.

For example, keep car payments in line with expected life of the vehicle. If you expect the vehicle to last you five years, don’t take on an eight-year loan. That will only force you to roll the remaining debt over into your next vehicle loan and prolong your timeline to become debt free.

Build a saving habit

Avoid being caught off guard by major home and automotive repairs. Put at least 10 percent of your income away in an emergency fund every month — and try to increase your savings rate as you reduce your debt. Aim to eventually save between six and nine months in living expenses.

Write a monthly budget

It’s not about being restrictive. Rather, a budget helps you understand how much income you have to pay your bills, pay down your debts, and still make room for leisure. A budget can also tell you how long it will take to pay everything off, so you have something to look forward to.

Your budget doesn’t have to be fancy, you can use:

Don’t forget to plan for irregular or periodic expenses like the holidays, taxes, seasonal auto maintenance, school fees, etc. throughout the year, too.

Meet with a Licensed Insolvency Trustee

If you need a little more help getting your debts organized and under control, schedule a Free Confidential Consultation with a Licensed Insolvency Trustee. Together you can review your financial situation, discuss your challenges and goals, and identify the most effective options to address your debt head on.

If they’re the right strategies for you, a Licensed Insolvency Trustee can also help you file a Life-Changing Debt Solution such as a Consumer Proposal or a Bankruptcy. The former would combine your debts in one manageable monthly payment and potentially reduce the total amount you owe. The latter would involve surrendering some assets and potentially a portion of your monthly income in exchange for eliminating your debt.

You deserve a financial fresh start. Contact MNP today to get the process started and make a priority of getting your debt under control.