Many Canadians are overextended. The time to take charge and control of your finances is now! If there’s a hike in interest rates, anyone with a variable rate mortgage is going to be in trouble, as will anyone with credit card debt. Financial troubles are arguably the worst problems to have in life, apart from health problems. The irony here is that financial problems can (and often do) give rise to health concerns. It can be daunting to face it, but many people just put it on the backburner and carry on. It’s time to take control and here are some tips to set you on your way.
1. Have A Family Meeting
Sometimes, money matters are not spoken about in front of the whole family. Time for that to change. Get your kids involved and let them understand the situation. Talk about how much you and your spouse earn and then talk about how much the bills are. A small increase in interest rates can have a big impact, so let your kids understand what this would mean. Let them know that just because they live in a house with two cars, it doesn’t mean that you are rich! Explain that these are part of the bills that need paying.
2. Create A Budget
If you don’t have an organized budget, it’s about time you did, as it is going to help you deal with the big picture. After all, you need to know where the money is going. Firstly, look at all the necessities, the things you really cannot do without for which you must spend. These will be things like food, mortgage, phone and Internet. Next, try to figure out if there’s anything you can do without. These could be eating out, cable TV or some other form of entertainment. Some sacrifices have to be made. Perhaps you have a gym membership. Is it necessary for you to have one? There may be free resources (or at least discounted) which you can use such as tennis courts, aerobics classes and swimming pools
3. Meet Your Bank Manager
Meeting with your bank is actually a good idea. You can seek a consolidation loan so that you can put your credit card debt and credit line debt together as this will enable you to get a lower interest rate as well as a lower payment. You can also discuss possible options with your GIC rates. With a consolidation loan, your interest rate may be around 8 to 10 per cent. When you consider that your credit card debt has an interest rate of about 18 per cent, that makes a significant difference.
4. Pay Down Debts
Now that a consolidation loan can free up some money for you, use this money to pay down your debt. The sooner you tackle it, the sooner you will be able to pay it off. Do not wait for interest rates to slow down, because if it doesn’t, it’s going to cost you.
5. Dump Credit Cards
If at all possible, eliminate your credit cards, then reduce your line of credit’s limit. You’re trying to reduce your debts, not increase it, so remove the temptation.
It isn’t easy, but it can be done with some sacrifices. Let changes be lifelong, so that you never get into debt again.