Did you know the average Canadian holds over $20 thousand dollars in debt, excluding mortgage debt? While around a third of Canadians are debt-free, over 60 percent of adults carry some sort of debt. Working toward a debt-free life may seem like an impossible task, but anyone can do it by using a system. Do you want to eliminate debt in your life? Here are some steps to take to start living without debt, save money, and obtain a debt-free lifestyle.
Build a Budget
First, see where your money is going. Take a look at your monthly expenses and write down an estimate of how much you spend on a regular basis. If a category fluctuates from month to month, it’s best to overestimate, rather than underestimate.
Your budget should include debt payments, with whatever debt method you choose. A budget is also super important if you lose your source of income, so you know immediately how much you will need every month to meet your basic needs.
If you see your spending skyrockets for certain categories, think of ways to make that number smaller. For instance, try shopping sales at the grocery store or limiting your restaurant visits.
Don’t make your budget too restrictive. Although it may seem like a good idea to pay down debt faster, it can backfire and make you want to spend more money.
Use the Snowball Technique
Having several types of debt can seem intimidating, especially when it comes to scheduling monthly payments. The snowball method is great for moving toward a debt-free lifestyle.
Once you pay off your lowest loan amount, take the money that you were putting toward the payment, then add it to your next lowest loan. You’re still spending the same amount every month, but tackling debt more easily.
To live debt-free even faster, put extra money toward your payment if you have it. You’ll be surprised how quickly you can knock out debt with this technique.
Put Thought Into Your Purchases
Impulsively purchasing big items can put you into a lot of debt. Before you make an expensive purchase, take some time to think about if you really need it.
Of course, some big purchases are inevitable, such as needing a new car. But if the item is a want, not a need, then it may not be worth going into more debt.
Lots of retailers offer payment plans on expensive items to entice customers to buy. Although this is an attractive option, it will still saddle you with more debt that you’ll end up paying off.
If the snowball method doesn’t work for you or you’re simply overwhelmed, consider consolidating your debt. Debt consolidation is a great option if you have a lot of credit card debt or personal debt.
You may also be able to transfer credit card balances to a card with a lower interest rate. Be careful with this method, though. Cancel your other cards or don’t use them until the debt is paid off.
Your bank might also work with you to get a consolidation loan. They will loan you the money and you can pay off your debt, then make one monthly payment with a lower interest rate.
Negotiate a Better Interest Rate
This solution isn’t for all types of debt, but you may be able to get a better interest rate on some of your loans. It’s important to make payments on time because that could help you save money in the future.
Talk to your lender about lowering interest rates and use your account status and payment history as evidence. If they want to retain you as a customer, they may be willing to negotiate rather than lose you to another company that offers more attractive rates.
Try the Avalanche Method
Another snow-related debt relief strategy is the avalanche method. Similar to the snowball method, it involves putting the same amount toward your loans every month.
Rather than starting with the smallest loan, the avalanche method attacks your debts with the highest interest rates first. This technique can be attractive if you want to save money in the long run while paying down debt.
A key factor in the avalanche method is putting as much as you can toward the loan with the highest interest rate. Once that loan is paid, you can move on to other loans and watch an avalanche of money take out your debt.
Not All Debt is Bad
Although a debt-free life is a great goal to work towards, sometimes you need to take out loans. Not all debt is bad. When managed responsibly, it can be a hassle-free part of life.
For instance, it’s worth it to get a car loan if you want to get a model that will last you a long time. As long as you stick to your budget and make sure you can afford the monthly payments, it can still benefit you.
Life happens, and so do emergencies. If you find yourself without money or you blew through your emergency savings, sometimes taking on more debt is the only solution. In this case, you may qualify for a quick loan to cover immediate expenses.
Work With Your Family or Partner
One of the most important things to do in a debt-free lifestyle is to work as a team. Everyone needs to be on the same page and modify their spending habits or payments.
Once you have a plan of attack, sit down with your spouse or family and go over the plan. You can take suggestions from others for how to pay off debt faster or cut expenses and save money.
Move Toward a Debt-Free Life Today
Attaining a debt-free life doesn’t have to be difficult. With these tips, you can be out of debt in no time and have more control over your financial situation.
Want more information on getting out of debt or getting a loan? Take a look around our site or contact us today for answers to all of your questions.