According to recent studies, the average Canadian consumer debt ranks in at $25,172 as of Q4 of 2021 (Gilson, CBC News). Having debt is becoming more common as economic uncertainty causes the cost of living to increase; however, there are steps you can take to gain control of your debt. Consolidating balances, creating a budget, and tackling small debt balances are three strategies that should be considered to effectively manage your debt.
Consider Consolidating Balances
The first strategy that many individuals see benefits with is consolidating small balances into one large loan. Each loan you have outstanding can be assessed fees and interest, racking up significant debt each month. Although your overall loan balance may not be different through debt consolidation, you may be able to save on interest and fees. Moreover, many debt consolidation services offer special introductory offers, giving you access to added savings. Keep in mind that your minimum monthly payment may be higher and payments still need to be made on time.
Create a Comprehensive Budget
Another debt management strategy that many Canadians see success with is creating a budget. A budget takes into consideration all the money you earn and spend within a set time frame, usually a month. To start, you will first need to understand your fixed and variable expenses each month. Fixed expenses are those that are reoccurring, such as rent, utilities, and car payments. On the other hand, variable expenses change each month. Common variable expenses include money spent at restaurants, shopping, and on groceries. Once you have a basic idea of where your financial situation falls, you can decide which areas to make cuts, allowing you to pay any excess towards your debt.
Tackle Smaller Balances First
An approach that is opposite of debt consolidation is to pay off smaller balances first. Although you should first consider which balances are generating the highest interest expense, paying off small balances can give you the push needed to keep going. Often times individuals get overwhelmed with paying off debt. The accomplishment of paying off one loan, even if it is small, is a big milestone and can encourage you to tackle the next one. Take a look at the different debt sources you currently have outstanding, create a plan, and start working towards your goal.
Next Steps
Debt consolidation, budgets, and paying small balances are three strategies that many Canadians see success with when it comes to debt management. Nevertheless, everyone’s situation is different, calling on the need to take a strategic approach tailored to your situation. Faber Inc has been helping individuals effectively manage their debt for years. Our fully staffed team understands that there is no one-size-fits-all when it comes to your debt management, which is why we find creative strategies for each of our clients. Reach out to one of our team members today to learn more.
Source
Gilson, Dave. “Alberta leads country in highest average debt and delinquency rate for final quarter of 2021.” CBC News, 7 March 2022, https://www.cbc.ca/news/canada/calgary/calgary-alberta-debt-delinquency-q4-2021-1.6375984. Accessed 14 April 2022.