By Jasmin Brown - Licensed Insolvency Trustee

BDO First Call Debt Solutions

5 Financial Goals to Set Right Now That Will Help You Reduce Your Debt

Dec 27, 2019 | 6:00 AM

Mortgage debt, ongoing credit card balances, vehicle loans, lines of credit, payday loans…there is no denying that debt (in one form or another) is a reality for most Canadian families.

Almost all respondents to a recent Manulife Bank of Canada survey agreed that the average household has too much debt. Two-in-five respondents expect they will never be debt free in their lifetime.

It is no wonder that the beginning of the year, when all those holiday bills arrive, is a stressful time in many Canadian households. The reality is that the only way to reduce stress is to reduce your debt. So let’s talk about how you can change your debt reality in 2020.

What financial lessons did you learn in 2019?

As we embark on a new year, it’s a good idea to reflect over the previous year and the money lessons you’ve learned. Ask yourself…

National

Ottawa to remove 30% investment cap for Canadian pension funds

1h ago

Budget woes

Golf and curling centre faces grim season without financial boost

4h ago

Raiders AGM

Raiders impact on Prince Albert local economy continues to go up: AGM report

23h ago

Which financial decisions from the past year am I most proud of?

Could I have done anything differently?

How can I ensure a better outcome this year?

Your answers to these questions will help you determine which goals are most important for you. For instance, did you rely on credit more often than you wanted to? Or did you sacrifice adding to your savings in order to pay for a vacation? Don’t think of these as failures or missteps, think of them as a learning experience that will help set the tone for your 2020 goals.

Five goals that will help you find debt relief

It is important to note that all financial behaviour can have a ripple effect. When you are determined to pay down your debt, increasing your savings and streamlining your spending can definitely help.

1. Practice mindful spending.

Did you add to your credit card debt over the holidays? How much will those purchases cost you over time? Mindful spending involves taking note of your spending habits and trying to make healthier choices more often. This might mean reducing impulse spending, avoiding retail email sales or shopping with cash or debit instead of credit.

2. Assess your wants and needs

When you find yourself daydreaming about a new spring wardrobe or a late-winter getaway, it is good to remind yourself about wants vs. needs. Setting financial goals does not mean ignoring discretionary purchases altogether. Depriving yourself of all enjoyment will make it very difficult to stick with your debt plan in the long-term. However, in order to reach your goal of having less debt, you may need to prioritize your wants, letting go of those purchases or experiences that aren’t as important to you and your family.

3. Create a budget

Use a budgeting app or worksheet so you can see where your money is going each month. Remember to take note of specific spending “events” that will come up during the year, like holidays, birthdays, a vacation, a necessary car repair or a home renovation. Add these “events” as lines in your budget (or create separate savings accounts) so you can plan ahead and have the funds on hand. Another good habit is to automate your monthly bill payments to save yourself time, and make sure you are not incurring late charges.

4. Find a debt repayment method that works for you

There is no one-size-fits-all solution when it comes to financial problems. If you feel you can tackle your debt on your own, look for repayment strategies that will motivate you to keep at it. The debt snowball or debt avalanche are popular. You can also try consolidating your high-interest credit card debt into a low-interest line of credit or a zero interest credit card.

If you are unsure of your best debt solution, schedule a meeting with a Licensed Insolvency Trustee like myself. During the initial consultation, an LIT will discuss your concerns and review your financial situation. The role of an LIT is to help you explore all debt solutions, finding the one that will work best for you. If you decide to file a consumer proposal or bankruptcy, an LIT is the only professional that is legally able to assist you with the filing.

5. Look for ways to stay motivated

If it helps, don’t think of your financial goals as New Year’s resolutions. For most people, resolutions rarely last beyond the end of January. Try to view your debt repayment, spending or savings goals as small changes you can make year round. Remember to review your progress regularly. Congratulate yourself on your successes and revise your goals if they are not working for you.

Another good way to stay committed is to find what inspires you. Check out a personal finance blog or podcast that resonates with you. Or find a friend or family member on the same journey and share your challenges and successes.

What are your financial goals for the new year? Connect with us on Twitter and Facebook! #LeaveDebtBehind