Canadians’ debt level increased by nearly 3% over the past year. That means the average household debt is over $70,000. More worryingly, the number of borrowers that have been missing payments has also increased.

It seems fairly easy to fall into debt, but it doesn’t have to overwhelm you. With these simple steps, you can get started on the path that will get you out of debt.

Why it’s Important to Get Out of Debt

As households become saddled with debt, it can feel like an insurmountable problem. Not only do you feel the pressure on your finances, but large amounts of debt can have a detrimental impact on your credit rating. Unfortunately, some people end up taking out more debt to cover their payments, and the cycle continues.

When you are in debt, there can be a lot of stress involved. There’s worry about whether you will risk losing your home, what will happen if you lose your job, and how you will prepare for future financial burdens such as retirement.

Working to get yourself out of debt is one of the best things that you can do to secure your financial future. It will not only free your finances, but it will also give you peace of mind.

Tips for Becoming Debt-Free

Many people want to pay off their debt but don’t know how to start. Getting out of debt doesn’t have to be difficult. With some strategy and effort, you can start to improve your financial position and head down the path to being debt-free. Depending on how much debt you owe, there may be different steps you need to include in your plan.

There are many different steps you can take to tackle your debt and pay it off. These include:

1. Don’t just pay the minimum amount

   If you want to tackle your debt seriously, aim to pay more than the minimum amount to your credit cards, lines of credit, and an overdraft. Paying just the minimum will leave you in debt for years. It will also mean that a significant sum of money will go towards interest payments. Put any extra amount that you can towards the balance to lower how much you’ll end up paying overall.

2. Adjust your spending habits

   Most people end up in debt because they spend more than they make, so you’ll need to curb your spending. Ensure that you have paid all your bills and covered any other costs before considering making any extra purchases. Changing your spending habits may not seem easy, but in the end, it can help you pay off your debt faster and prevent you from racking up further debt.

3. Snowball your payments

   One of the best ways to get a grip on your debt is to pay off the one with the smallest balance first. Pay just the minimum on all your other debts. When your smallest debt has been paid off, you can put that money you’ve been putting towards it into the next smallest debt until it is paid off. Then, use the extra money to pay off the next smallest debt and so on. As your balances start to disappear, it will give you a feeling of winning that will motivate you to keep going.

4. Get a side-gig

   Earning some extra money on the side can help you make bigger payments and pay off your debt faster. Consider what types of skills you have that you can offer to others. Babysitting, mowing lawns, shovelling sidewalks or virtual assistance tasks are among the top easy side jobs that you can take on. Joining the gig economy can get you some extra cash that you can use to do this.

5. Reduce your budget

   Another way to find more money you can use to pay down your debts is to cut back your budget as low as it can possibly go. Cut out any extras that you can live without for a short while.

6. Sell your unwanted items

   Do a good house cleaning and collect all the things in your home that you don’t want or need anymore. Provided they are in good enough condition, start selling them. You can post ads online or use your social media account to let others know or have a yard sale. Use the extra cash earned from your sales to pay off your debt.

7. Shop strategically

   Watch for everyday items that are on sale and stock up. Use coupons to help reduce what you are paying for groceries and other necessities. Items that you can stock up on include non-perishables or foods that you can freeze.

8. Put extra money towards your debt

   Any gift money, bonuses, inheritances or a salary increase should be put towards paying down your debt. Any unexpected money that comes your way can be used in this way to help you become debt-free faster.

Build Your Debt-Free Plan

Getting out of debt requires a good plan to help you manage your money and maximize your payments. Here are some ways to get started:

1. Collect your financial information

   Make a record of how much money you owe, who you owe, your credit rating and your credit report.

2. Make a list

   Create a detailed list of your debts. Include how much you owe each creditor, what the minimum payment is each month and what the interest rate is.

3. Consider consolidation

   The interest accumulated on large debt can be a big hurdle to overcome. If you are paying a significant amount of money in interest payments, consider consolidating your debt into a single amount with a lower interest rate.

Start Paying Off Your Debt Now

No matter what your reasons for wanting to pay down your debt are, you can start down the path of becoming debt-free. By taking some steps to curb your spending and pay down your debt, you’ll find it becomes easier to tackle it.

If you are interested in learning more about how to get out of debt, call Charles Advisory Services at 416-486-9660 or contact us here.