“Many times we look towards a cure when we really should be looking for prevention.”David Low
Debt is one of the most serious cancers of our society. It makes banks rich and Canadians poor. Debt robs people of the quality of life they deserve. Many times we look towards a cure when we really should be looking for prevention. It is easier to stay out of debt practicing good money management principals than it is applying surgery to our financial lives. The following principals are what we use to apply to debt elimination, however, the basic components also apply to debt free living;
How to Reduce Your Debt
- You need to establish where your money goes every month. To do this, you develop a tracking system. For a 30 day period, you keep a receipt for every expense that you have. At the end of the month, you would add up the receipts so that now you know in an average month how much you spend. You need to produce a new category for every spending habit and bill.
- Calculate a total monthly income that actually comes into your home. If you then subtract the income from the expenses, you have an amount left over to pay any other ongoing debt. Hopefully this figure is not in deficit as it marks a serious problem.
- Having always paid at least the monthly payments on debt faithfully, you can contact credit cards to acquire a cheaper interest rate.
- Decide to pay minimum payments on most debt except the one that has the highest interest or the one with the lowest balance. On that debt, you pay the balance of what is left over from step 2.
- Compound your repayment of debt structure. When paying off a creditor, take that usual payment amount and add it to the next creditors’ payment that you want to pay off quickly.
Of course this process may look complicated, but if you receive the advice of a government licensed credit counsellor, they would do all this for you and you would have eliminated all your debt in about 4 years and have you on a plan to never be in debt again (even no more car payments). If you are looking for how to reduce your debt, these are great steps to start with.