Worried About Rising Rates? This is the Year to Reduce DebtJan 17, 2019
The holidays are over and reality has set in. It’s time to buckle down and reduce debt. As if those balances weren’t enough motivation, homeowners are especially worried about the effect rising interest rates will have on their consumer debt and variable mortgage payments.
So we’re sharing some of our best advice with Canadians who want to get out of debt this year.
What’s good for the economy isn’t so great for your debt
Since July 2017, interest rates have risen five times, and they’re expected to rise multiple times in 2019. While this spells great news for Canada’s economy which is in recovery, it doesn’t bode well for homeowners who are carrying debt or looking to renegotiate their mortgages.
According to a 2018 CBC survey, nearly 60 per cent of Canadians said that an additional expense of $100 in their monthly debt payments would force them to rethink their spending habits. BDO’s Inaugural Affordability Index found similar results:
Nearly 40 per cent of Canadians find it challenging to afford clothing and household necessities.
One-in-three find it difficult to cover their utilities each month.
One-in-four have difficulty feeding their families.
How to make your debt a priority this year
After years of cheap borrowing, higher interest rates mean higher debt payments. And if you’re already feeling the squeeze on your monthly income, it’s time to get serious about your debt. Here are some ways you can implement debt relief strategies all year round.
- Calculate your debt. Do you know how much you owe? Before you begin to pay off your balances, calculate your totals so you can track your progress. Use this debt calculator
- Set a goal. Making minimum payments will get you nowhere fast. Find a method that works for you such as the debt snowball or avalanche method so you can squash those balances sooner. You can start with your smallest debt and work your way up, or vice versa. Whatever you choose, set a goal such as three or six months and aim to pay off one whole balance. Get started by using this debt snowball calculator.
- Follow a budget. Track your spending and cut costs wherever possible. A budget gives you the opportunity to plan ahead for upcoming costs while maintaining your monthly responsibilities. Use this online budgeting worksheet or download a budgeting app.
- Adopt a minimalist mindset. Rethinking your purchases will not only limit the clutter in your home, it can also save you money, time and stress. Before you shop, write a detailed list and follow it to avoid impulse purchases. Check out how these minimalists handle their finances for inspiration.
- Get help when you need it. Heavy debt can be immobilizing. If you’re feeling overwhelmed and don’t know which steps to take to reduce debt on your own, a Licensed Insolvency Trustee (LIT) can help. An LIT can recommend a variety of debt relief options based on your needs and give you additional tools to make your journey successful. Compare your debt relief options using this repayment options calculator.
Are you feeling the squeeze of higher debt payments on your budget? How will you reduce debt in 2019? Share your journey with us by connecting on Twitter. #LeaveDebtBehind #NewYearMotivation #LITsCanHelp