The Bank of Canada (BOC) recently raised interest rates for the second time this year. Many analysts say that the central bank could pull the trigger on one or two more rate hikes later this year. This will not bode well for households that are swimming in debt.
According to the latest Statistics Canada data, the average Canadian owes $1.70 for every $1 they earn. Moreover, Canadians are entrenched in lines of credit, home equity lines of credit, credit card debt, auto loans and so many other forms of debt just to live their lives. Simply put: it is going to be costly to service your debt moving forward.
Before it gets too out of hand, perhaps it is time to meet with a credit counselling service. These types of organizations will try to consolidate your debt, tackle your budget and/or lower your monthly debt payments. It is a great service to take advantage of, especially in today’s times.
Here are five debt relief tips your credit counseling service will tell you:
1. Take a Look at Your Debt
How much debt do you have? Before you answer that question, we want you to grab all of your credit card receipts, line of credit statements, auto loan records and every other type of debt you have. Once that is done, it is time to calculate your entire debt level.
Now, how much debt do you have? When you answer this question, you shouldn’t rely on an estimate.
2. Understand How Much You’re Taking in
For whatever reason, we don’t know how much we earn. Despite the fact that we work at a job we don’t like five days a week and for eight hours a day, we don’t keep a record of our earnings.
It’s time to change that. Moving forward, you should keep a strict record of how much your weekly or bi-weekly paycheque is. Otherwise, you’ll make the mistake of spending more than you make, which will get you into hot water and prompt your household to live paycheque to paycheque, something that nobody ever wants.
3. Establish a Monthly Budget
Not maintaining a monthly budget is like walking through life blind. You need a budget to survive and thrive, otherwise you could be throwing your money down the drain.
At the first opportunity you get, you should grab a cup of coffee, open up a Microsoft Excel spreadsheet and start crunching the numbers. By doing this, you garner a greater understanding of where your money is going, and you will be shocked at how much you’re wasting.
Do you really need a $5 Starbucks latte every morning? Or that gym membership you never use.
Remember, when a credit counseling service gets a hold of this information, they’re going to slam their own head against the desk.
4. It is Time to Change Your Lifestyle
Those who live beyond their means are destined to live beneath their means.
Are you living a $100,000 lifestyle on a $60,000 salary? It’s time to change your lifestyle.
This means that you should only spend what you have, and probably even less than that to save. Everything from eating out only once a month to cutting the cord, there are so many things that you can and should do to save money, spend less and cut down your debt.
If you have ever read the Globe and Mail’s Financial Facelift section, you may have covered your face with your hands by the questionable spending decisions the couple has made.
Don’t let that be you.
5. Stop Using Debt to Live Your Life
Finally, you need to cease utilizing instruments of debt to live your life. If you’re primarily using credit cards and lines of credit to get by, then it will be extra difficult to rein in your debt. Once you have your pecuniary matters in order, you will need to depend more on cash and your debit card than an American Express.
Canadians are more in debt than ever before. Canadians are living paycheque to paycheque more than ever before. Canadians are spending more than ever before. These are trends to envy.
With a rising-rate environment on the horizon, it will be immensely difficult for the average Canadian to survive. Before you start drowning in debt and bleeding even more red ink, you should contact a credit counseling service to ensure you can escape the eye of the storm.