You might be feeling a bit frustrated and nervous about upcoming bill payments, rising costs, and changes in income. The solution? A jumpstart to your finances with financial planning and credit counselling. Not only will a jumpstart help you recover from any debt you might be carrying, but it’ll also strategically position your finances to offer you more security, confidence, and happiness!
Here at Credit Canada, we’ve proudly offered professional debt services to Canadians for more than 50 years. With thoughtful (and free!) credit counselling, we help Canadians embrace tangible methods for paying off debt to improve their overall financial health. In other words: our goal is to help you save your money, pay your debts, and plan for your future!
How to Jumpstart Your Finances
Ready to supercharge your finances? There's no time like the present! You can do it, and if you need help we’re here to support you along the way. Let’s give your finances a boost with these five tips for financial success.
1. Write Down Your Debts
Has anyone, a teacher, professor, or family member ever pestered you to write things down more? Whether it’s a grocery list, task list for work, or goal-setting for the future, writing things down is proven by neuroscience to help you succeed. It improves your memory to help you stay on track and strengthens your mind to retain the most important information.
We know… who wants to be reminded of the $4,000 balance on their credit card, or the compounding interest on their student loans? It’s hard to look at debts — it stresses us out!
But with a 170% debt-to-income ratio among Canadians: trust me, every Canadian needs to acknowledge and be aware of their debts.
The first step is writing them down.
Use an excel spreadsheet or a simple pen and paper to lay out all your debts.
Make sure to include all of this information for each debt entry:
- Type of debt
- Amount owing
- Interest rate
- Minimum payment amount
- Payment due date
Nervous that you forgot any debts? It might be time to check your credit report.
2. Explore the Avalanche and Snowball Methods
Now, it’s time to choose an approach to pay your debts. Here are two common methods:
The Snowball Approach
Slow and steady wins the race with the snowball method. This method entails paying as much as you can towards your smallest debts while making minimum payments on your larger debts. Once you pay off one debt, move on to the second-smallest debt, and so forth.
Many of our clients find this method so satisfying, as you get to check little debts off of your list one by one.
The Avalanche Approach
One or two of your debts likely has a higher interest rate than the others *cough* credit cards *cough.
At 19.99% interest, you might want to tackle that debt the fastest. The avalanche method entails making only the minimum payments on all your debts while putting as much money as possible towards your highest-interest debt.
Read more about the snowball and avalanche methods here!
3. Create a Plan to Pay it Off
“A goal without a plan is just a wish.” The author of the Little Prince was onto something here! Unfortunately, you can’t wish away your debts (we wish it were that easy!).
As mentioned, nobody likes to be reminded of their debts. It’s easier to ignore it, but not in the long run. Once you acknowledge and write down your debts, it’s time to make a plan to pay it off. You can make meaningful moves towards paying off your debts, consistently chipping away at them day by day with a plan!
If you don’t have enough funds on hand to pay off your unsecured debts in full (i.e., credit cards, payday loans, etc.), you have two options to help pay off your debts:
Increase Your Income
The COVID-19 pandemic amped up the gig economy, as thousands of employers favoured flexible, part-time work for the smaller burden on their labour budgets. Many 9-5ers shifted to a work-from-home model as well, offering up extra time from a would-be commute. The increase in demand, and for some people, the extra time in the day, is a great opportunity to consider alternative sources of income.
You might find a part-time job in the evening, or tutor during the hours that you would be commuting. Increasing your income is one way to put more money towards your debts.
Keep in mind though, this isn’t a viable option for many, especially for those who have children to take care of at home. An easier way to have more money for your debts is to limit your spending, which brings us to option two.
Cut Down Your Expenses
Just like you write down your debts, write down your expenses, too. This includes rent, food, entertainment, transportation, and everything else that eats up your paycheque!
Choose 2-3 of your biggest expenses and see where you can cut some down. Oftentimes, you can’t do much about your rent. But your food expenses? There’s some wiggle room. Limiting take-out is one option, as is being more intentional during your grocery trip.
In general, it's always a good idea to highlight different expenses you may be able to reduce or cut out completely if you're really in a pinch, budget-wise. That way, if you experience a reduction in income or need to add an additional expense, you already have an idea of how to make your budget work.
Create a plan and commit to solid activities that will help you fulfil your debt plan. Need some support? Our skilled Credit Counsellors have decades of experience helping Canadians create debt repayment plans.
4. Automate Your Life
Thousands of businesses have embraced the power of automation when it comes to productivity and business growth. Employees love removing menial tasks from their day so they can focus on the more creative, impactful areas of their job.
The same goes for individuals! Nobody wants to log in to their online banking, or worse — actually go to the bank — every time they need to pay a bill.
The solution? Automate your payments. Having just one less menial task to worry about can supercharge your finances and lead to big gains! Not only will this help you avoid late charges and pay off debt, but it can also help improve your credit score.
Make Repayment Easy
Talk to your bank or sign in to your online banking to create automated repayments for your debts, whether it’s just your minimum payment or a larger amount.
Pro Tip: If you think you need it, sign up for overdraft protection before automating payments, especially large ones. The last thing you need is the bank adding to your debt with a non-sufficient funds fee.
Make Spending Hard
Just like automated repayments make it easier to pay off debts, automated spending makes it easier to get into more debt!
How many subscription services do you have? Amazon Prime, Netflix, Crave, and Disney+? You definitely don’t need four streaming services eating up over $50 of your monthly budget.
There’s a happy medium. Netflix, for example, lets you cancel your subscription anytime without any fees. Set a reminder on your phone to assess your TV watching at the end of the month. Did you use Netflix much? No? Then cancel it and subscribe only when you think you’ll need it again.
Hopefully, the tediousness of unsubscribing will help you live without it, anyway.
Even if cancelling some subscriptions only saves you an extra $20, that’s money you can put towards your debts!
5. Get Support from a Credit Counsellor
There’s a reason why Canadians fear debt almost as much as they fear death. We understand completely — debt issues take such a toll on our mental and emotional health, affecting our sleep, relationships, mood, and professional life. Make sure you take care of your health to handle the stress — eat well, exercise, make sure you get enough sleep and find ways to feel at peace.
But it’s hard to do it alone. Here at Credit Canada, we’re happy to offer you free, confidential advice about your debt repayment options, whether that looks like:
- Debt consolidation
- Budget coaching and one-on-one credit counselling
- Custom spending plans and financial goal-setting
How Credit Canada Can Help
If you're feeling anxious about your finances and debts, let’s jumpstart your financial success, starting with a free consultation with a Credit Counsellor. Give your mental well-being a boost by supercharging your finances today!
Frequently Asked Questions
Have a question? We are here to help.
What is a Debt Consolidation Program?
A Debt Consolidation Program (DCP) is an arrangement made between your creditors and a non-profit credit counselling agency. Working with a reputable, non-profit credit counselling agency means a certified Credit Counsellor will negotiate with your creditors on your behalf to drop the interest on your unsecured debts, while also rounding up all your unsecured debts into a single, lower monthly payment. In Canada’s provinces, such as Ontario, these debt payment programs lead to faster debt relief!
Can I enter a Debt Consolidation Program with bad credit?
Yes, you can sign up for a DCP even if you have bad credit. Your credit score will not impact your ability to get debt help through a DCP. Bad credit can, however, impact your ability to get a debt consolidation loan.
Do I have to give up my credit cards in a Debt Consolidation Program?
Will Debt Consolidation hurt my credit score?
Most people entering a DCP already have a low credit score. While a DCP could lower your credit score at first, in the long run, if you keep up with the program and make your monthly payments on time as agreed, your credit score will eventually improve.
Can you get out of a Debt Consolidation Program?
Anyone who signs up for a DCP must sign an agreement; however, it's completely voluntary and any time a client wants to leave the Program they can. Once a client has left the Program, they will have to deal with their creditors and collectors directly, and if their Counsellor negotiated interest relief and lower monthly payments, in most cases, these would no longer be an option for the client.
