2018 has been a somewhat scandalous year for the Bank of Canada, and as their interest rates rise, it tends to affect consumers on a macro level. Financial surveys this year have shown that one-third of Canadians fear bankruptcy.
New lending criteria and mortgage rules may have put some people into a dark, debt-ridden hole that they are struggling to surface from. Are there any strategies to help people who are coping with surmounting debt and rising interest rates?
In this post, we’re going to look at three of the best ways to help you take hold of your finances this year.
Some say the smartest strategy to pay off debts is by focusing on one at a time. This means that you make the minimum payments on all of your accounts while making larger payments on the ones that are charging you the most interest.
This way, you eliminate the accounts that can snowball out of control first, by focussing all your above-minimum payments into one place at a time (preferably in a lump-sum fashion). Once you pay off the debt with the largest interest, you move on to the next debt in line.
Increasing your income temporarily can go a long way towards paying off your debts faster. If you can manage a second job, increase working hours, or capitalize on a hobby or service that you’re good at, you can put all that extra income to the debts you want to be repaid.
Even renting out a room in your house, a parking space or specialty appliance can bring in the added income you need to get debt-free sooner.
Look around your house. Do you really need the expensive hockey gear you use once per winter? Are there recreational vehicles sitting in your driveway? Expensive electronic equipment you’ve fallen out of love with? Designer clothing that is so last season???
Any secondary assets that can be sold for debt repayment should be considered if you’re serious about becoming debt-free. This doesn’t mean that you can’t buy these presents for yourself again, but it does mean that you haven’t a need for them right now.
Remember, none of these financial behaviours need to occur for the rest of your life. But, putting these three tips to work will get you out of the hole a lot faster than just paying the minimum on your debts or doing nothing to generate extra income.
These are temporary solutions on what you should consider temporary debt, because you can definitely get through this with some dedication and perseverance.
If it’s a big personal loan, student debt load, or credit card bill, attack each debt source systematically and you should be able to see the light at the end of the tunnel in no time.