Money hurdles for 2014: How to get out of debt ASAP
According to a recent TransUnion survey, 47% of Canadians are committing to at least one financial resolution this year. That being said, 37% did not reach their goal in 2013.
Resolutions are easy to make, hard to keep. Goals can be more attainable if you have a coach in your corner. So let us help you tackle your financial resolutions for 2014.
‘We resolve to reduce our debt as speedily as possible’
Motivational quote for your fridge: “It always seems impossible until it’s done.” — Nelson Mandela
Pep talk: You are determined to tackle your debts. You’re not alone. Paying down debt was at the top of Canadians’ financial priorities last year, according to CIBC. And we ought to take action — TransUnion predicts that average Canadian consumer debt will rise by 4% to an all-time high of $28,853 by the end of 2014.
Debt is stressful but think of how awesome you’ll feel when you’ve got a plan to beat it, when you’re seeing it retreat, when you’re finally free and clear, when you’ve got all of that extra money, etc.
Peer support: At the age of 20, Mike Bremner moved to Whistler, B.C. He also got his first credit card. “By the time I was 23, I had $20,000 in credit card debt,” he says.
When he maxed out one $15,000 card, the company increased his limit to $45,000. That was the moment he realized that his situation wasn’t going to change without his own intervention. He cut up all of his credit cards except one.
“You have to change your lifestyle. I cut back on spending by not eating out and drinking as much. I shopped online instead of in stores. I got a second job,” he says. “This all sounds like a nightmare to some people, I know. But your life is going to be better in the future because of this.”
Being in debt sucks. It’s hanging over your head and it’s hard work to get out of it
The 28-year-old independent contractor for a technology company in Chester, N.S., put more than $500 every month to his debts for four years. He became debt-free in March.
“I said once I was out of debt, I’d spend the money to go on vacation and get a new car; but I’ve been spending more wisely and I’ve been keeping the money to do nicer things,” he says.
“It is hard to see the end. When I made my first payment, it felt like nothing. But it’s like going for a car drive across the country. On the first day, you don’t look at getting to your destination. You look at driving across the province. You have to set realistic goals for yourself.”
Expert advice: “Being in debt sucks. It’s hanging over your head and it’s hard work to get out of it. I would set some goals and be merciless until I’ve achieved them,” says Jeff Schwartz of Consolidated Credit Counseling Services of Canada.
“The one way that I’d do it is through budgeting. It creates boundaries. Look at certain expenses. I want you to cut those out right now even if it’s for a short time. Maybe it’s cutting your cable for the next six months or no more eating out. Maybe [say,] ‘I’m going to brown-bag my lunch every day. Whatever it takes to cut out the fat from my financial diet so that I can apply all of that money towards paying off the debt.’
“The last thing I say is start today. A, it’s going to make you feel good. B, the sooner you start, the quicker you will be able to accomplish your goals around debt. Waiting until Monday, waiting until you get your tax refund, that’s just putting off the inevitable and your money is not working efficiently until you do that.”
Melissa’s checklist:
• Whenever someone says they’re trying to get rid of debt and I see them swipe their credit card, I think of The Simpsons episode where the townsfolk have literally dug themselves into a deep hole: “How are we going to get out of here?” Otto asks. “We’ll dig our way out!” Homer exclaims. Then Chief Wiggum retorts: “No, dig up, stupid!” So stop using credit. Now.
• Take your credit cards out of your wallet so there’s no longer a temptation to use them.
• Do up a budget. Figure out how much you spend and where to cut back.
• Write your goals down. Figure out how much you need to save and how long it’ll take you to do it. Be specific. For example, I want to save $200 every month to pay off my credit card debt in a year.
• Create cash flow. Take a second shift. Work overtime. Do odd jobs. Freelance. Sell items around the house. Participate in focus groups for money. The fastest way to get debt down is to throw as much money at it as possible.
• Do what motivates you most: Attack the debt with the highest interest rate or pay off the lowest balance.
• Once you pay off one debt, take the money that you were using to service that debt and put it to the next one, and so on.
• Consolidate your debts into a low-interest loan.
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