Most Canadians have debt so you’re not alone. Mortgages, student loans, auto loans, personal loans, credit cards or whatever it may be, most of us carry debt of one kind or another. If you want to get out of debt quickly, you can with a little planning.
We won’t pretend getting out of debt is easy because it isn’t. We all know it isn’t. What we will say is if you approach debt using one or all of these tips, you could pay off your debt faster than you otherwise might.
That has to be worth trying, right? Here’s how to get out of debt quickly.
Set Up a Budget
Your first step is to know exactly where you are each month. Without knowing where you are, you won’t be able to accurately assess where you go from here.
A budget doesn’t have to be complex. A simple Google Sheet with a column for income, a column for outgoings and another column for debts is all you need.
List all your income, every single outgoing and list your debt in order of interest, with the most expensive at the top.
Make Some Simple Savings
Now you have your financial life in black and white, are there cuts you could make? Do you pay for the gym but never go? Have subscriptions you don’t use? Are there some simple savings you could make to improve your situation?
Some simple savings could include cooking at home for date night, shopping around for groceries or gas, not buying branded goods all the time, making your own coffee, making your own lunch, cancelling magazine subscriptions or going for cheaper online-only versions.
Stop Taking on More Debt
If you live in your overdraft or on your credit cards, that’s the first habit to stop. Hopefully, any savings made in the previous step could be enough to help get you out of the red each month and perhaps even generate a small surplus.
If debt is because of spending habits, you need to change them. It may not be the news you want to hear but if you do the same things, you’ll get the same results.
Pay High Interest Debts Off First
Unless you owe a lot on lower interest debts, it’s always a good idea to pay off the most expensive debt first. That’s why we suggest listing them in cost (interest rate) order. When you create a cash surplus, use it to pay off the most expensive debt first so you’re paying out much less in interest.
Interest is lost money so the more you can minimize that, the more of the actual debt you’ll be paying off.
Consider Cutting More
Depending on how much you owe, if your simple savings plan doesn’t generate enough surplus cash, consider a short barebones budget for a couple of months. It will be tough but it will also be worth the sacrifice.
Assess how much you need to save and for how long. Set it up so you live on the bare minimum for that period of time. Cut everything you can to maximize the impact and then have a small celebration at the end.
You’ll find it much easier to live like this if you know there is a specified end date and a genuine reason for doing it.
Paying off a significant debt should be reward enough but some people need a little more and that’s fine!
For those of you who know that you have a challenging credit situation, please visit Dixie Auto Loans where we have a team of credit specialists ready to help you get approved for a car loan today!