How to Achieve Balance Between Debt Repayment and SavingsJun 22, 2016
Do you feel like most of your paycheques are going toward debt repayment? Your debt-life balance might need some adjusting. Canadians continue to take on debt at a rapid rate, yet for the most part, incomes remain static. Credit card debt in Canada rose 4 per cent at the end of 2015, while the number of consumer proposals have risen 2.9 per cent in Ontario over the past year. In an ever-expanding city like Barrie, new businesses and housing developments sprawl out into new areas of the city. And although new businesses mean better infrastructure and a boost to the local economy, they can also mean more opportunity for residents to spend as big-name businesses make Barrie their home.
A recent report named Barrie one of 15 best cities in Canada to find work. This is promising news at a time when unemployment across Canada looms large and costs of living continue to rise. Barrie’s median household income sits just above $80,000 — slightly higher than the national average. However, income is not an accurate indicator of debt load, and many top earners are just as likely to be living paycheque to paycheque as those who earn less. Learning ways to decrease the stress of debt and maintain a balance between the debt you carry and your quality of life can benefit all areas of your life.
In order to restore a balance in your finances, you’ll first need to identify the cause of your debt. Do you follow a budget? Are you overspending in certain areas each month? Perhaps your costs of living have increased and you are relying on debt to extend your income and keep up. Whatever the case, reducing debt can create a ripple effect, improving many other areas of your life. A few suggestions to reduce debt and stress in your life include:
- Follow a budget. Use an app or spreadsheet to accurately track spending and expenses each month. Look for areas where you can cut back in order to direct more funds to debt repayment.
- Plan for the long term by avoiding credit cards. If you’re using credit cards to make up for income shortfalls, they may be giving you a false sense of security. Think in terms of your projected finances and goals — high interest credit card debt can quickly spiral out of control.
- Be aware of moods or circumstances that may trigger you to overspend.
- Know your limits and seek help early. If your debts have become an overwhelming presence in your life, seek professional credit counselling services or elicit the help of a debt relief professional like a Licensed Insolvency Trustee.
If you’re finding it difficult to stay on track with your current debt repayment plan, you might want to try the snowball method. It involves maintaining minimum payments each month on all debts, while attacking your lowest debt balance with as much extra money as you can afford. This method is a quick way to not only reduce your debt, but keep you motivated as you watch your balances shrink. You’ll still need to practice the above strategies to ensure you don’t add to your credit cards again once they’ve been repaid.
For Barrie residents who are struggling to keep up with their debt repayment, speak to a Trustee about the advantages of filing for a consumer proposal. A proposal is a form of insolvency that allows you to retain all of your assets while repaying a portion of your debt. This is an excellent option for those who owe a large amount of debt, up to $250,000.
How fit are your finances? Use these credit and debt calculators to learn more about your own situation.
Let’s talk about the ups and downs of dealing with debt. Join the conversation on Twitter using these hashtags: #LetsTalkDebt #BDODebtRelief