As the cost-of-living increases and interest rates rise, you may find yourself in a financially difficult situation. If paying down your debt is becoming a challenge, small actions can make a difference.
Review your budget
Revisiting your budget is always a good idea. Look carefully to see where you can cut costs to rebalance what you spend versus what you put towards your debt. If you don’t have a budget, you can try the Financial Consumer Agency of Canada’s online budget planner to get started.
Set a timeframe
Set a payment timeframe that is reasonable, yet still affordable for each debt you owe. If your timeframe is too long, you may lose focus. You’ll also end up paying more money in interest. If your timeframe is too short, you may not be able to keep up with your payments.
It’s also a good idea to separate the “good debts,” which are usually investments such as a mortgage, and the “bad debts” that are usually something that immediately goes down in value after purchasing. In general, try to prioritize paying down your debt that has the highest interest rate.
Seek advice
If you’re struggling to keep up with payments, work directly with your creditors or bank to find solutions. They could decide to lower the interest rate on your debt, extend your payments over a longer period and reduce your minimum monthly payment. They could also offer to consolidate your debts into one loan.
If you feel like you’re under water and there is no way for you to ever get on top of your debts, there are still options. A Licensed Insolvency Trustee can help you get back on track. The Office of the Superintendent of Bankruptcy has resources and information you can trust on the matter.
Find more tips and free, objective resources at canada.ca/financial-literacy-month.
