If you are having trouble paying your bills, are getting calls from collection agencies and are losing sleep over worries that you are carrying too much debt you are not alone. Canadians are knee deep in debt and the tide keeps rising. Debt reduction may be a goal for many Canadians, but it just doesn’t seem to be on the horizon yet.
Average personal debt as a percentage of disposable income in Canada rose again this past quarter to 163.4%. This despite public warnings in the media and by debt advisors across Canada that debt reduction needs to be a top priority. Canadians continue to take on debt to purchase homes or renovate. Worse yet, Canadians are, in record numbers, taking out home equity loans or borrowing on their line of credit and credit cards to purchase everyday consumer goods that will not likely hold their value as long as it will take them to repay that debt.
If you are concerned that you might be swimming against the debt tide here are some tips to help you keep afloat.
Don’t Use Debt To Purchase Consumer Goods
While debt reduction is an excellent goal, a better goal is not taking on debt in the first place. Borrowing against your house or using credit card debt to purchase that next ‘must have’ item will sabotage your goal of reducing your debt. Instead, take control of your personal finances. Evaluate every purchase. Is it a need, want or desire? Ask yourself if you really need that television, newest cell phone or trip? If you decide that you do, create a household budget that ensures you set aside some money every week into a separate fund until you have saved enough to pay for it in full. Never borrow money to pay for items that will decrease in value before you can pay them off.
Accelerate Debt Reduction – Borrow Smarter
All debts are not created equal. If you are a new home buyer and have a mortgage against your home your own family debt to income ratio may be high to begin with. The key is to stay focused on debt reduction over the long term and not take on extra debt along the way. Be smart about how you manage the debts you have. If you have expensive credit card debt, start now and make a plan to eliminate your credit card debt as soon as you are able to. If you have several debts, including some high interest debt, consider using a debt consolidation loan to reduce your monthly payments and pay off those debts faster.
Credit Counselling Can Help — Choose the Right Debt Advisor
If your debt seems like a tidal wave fast approaching, you may need to seek help with your debt reduction from a professional who can help you bail out your sinking debt boat. The type of debt help you need will depend on your specific situation. A debt management plan through a credit counsellor may work for you. Another debt reduction solution may be to negotiate a debt settlement with your creditors.
Like your debt situation however, not all debt management and debt settlement companies are created equal. Be aware of debt management plans and debt negotiation services that ask you to make a monthly payment without any assurance that they will be able to successfully negotiate a settlement with your creditors on your behalf. Consider a formal consumer proposal to your creditors as an alternative.
But what if you are already under water? As a last resort, your final option may be to declare personal bankruptcy. Bankruptcy in Canada can help you reduce your debt and provide you with a fresh start.
If you need help with your debt reduction plans, contact an expert today.