Debt Repayment How-To: Prioritize and PlanJan 31, 2018
For many Canadians, holiday cheer is in the rear-view mirror, and financial responsibilities like debt repayment are in front of them. Rethinking your debt and your approach to it can help you pay it down faster and put a year-round pep in your step.
A resolution isn’t a plan
There’s a great saying that goes, “a goal without a plan is just a dream.”
This couldn’t be truer. And when it comes to debt repayment, a solid plan will serve you well.
By February, the majority of people who make resolutions drop them. Good planning goes a long way to keeping you on track to achieve your goals. It helps you avoid becoming overwhelmed, doubtful, or unmotivated. Creating a financial plan that includes debt relief starts by putting things down on paper and setting a realistic timeline.
Some myths and tips
Rethinking how you think about debt is important. Change your perspective, and you will likely change your financial future for the better.
Know that debt isn’t cut and dried. Some debt, like a car loan for a reliable vehicle, can help you to achieve other goals. If you’re able to get to your job, or school, you are more able to increase your wealth or prospects for the future. There are many real and unexpected costs. Tuition, food costs, and transportation can be challenging. But other debt, like consumer debt, can be toxic to your financial health.
Remember that consumer debt is almost never necessary, it’s almost always a discretionary choice. So before you choose to borrow for everyday spending, remember that you’re sacrificing something else. If the sacrifice is debt repayment, you’re making the wrong choice.
Being honest about your debt situation and taking responsibility for it can help you kick your debt-dependency. Remind yourself that you do have control over your finances. Though you might need time or help to get out of debt, it isn’t impossible.
Get planning for debt relief
As with most things, you won’t find much long-term success paying down your debt if you don’t know (or believe in) why you’re doing it.
Start by setting out your “why.” Make your reasons personal, and you’ll build up your resolve. That will help you avoid giving into consumer debt temptation, or exhaustion, or fear.
Make debt repayment a priority. Know that one simple action — paying down your debt — has multiple benefits. It results in you not owing anyone else money, obviously. But it also frees up money. Instead of making payments, you can build your savings, invest in your future and retirement, buy a home, travel, and live a lifestyle that is comfortable and free of worry.
Bruce Sellery at Moolala wrote a great blog about his idea of the “Priority Pyramid” for finances. Read it to help you determine what yours looks like.
If debt relief is a part of your New Year’s resolution, or part of your financial dream, make 2018 the year you turn a dream into a plan.
Check out our first podcast of 2018! Our Licensed Insolvency Trustees offer 5 great tips on how to approach your debt differently this year.