Start Conquering Your Debt Today
Canadian household debt levels are likely to hit a record high this year according to the Parliamentary Budget Officer, making it increasingly difficult for Canadians to cope in the slowing economy. The parliamentary watchdog recently analyzed the economic risks of rising household debt and found that the debt-to-income ratio is set to hit its highest level since 1990. The debt level is predicted to reach 174 percent this year, up from 171 percent at the end of last year. That means that for every $100 the average Canadian earns they owe $174. The government states that this is mainly driven by the continued rise in home prices, which was one of the reasons the government opted to increase the minimum down payment for houses costing over $500,000.
High debt levels leave Canadian households increasingly vulnerable to negative shocks such as a sudden drop in income. Getting your debt under control can ultimately save you money as you end up paying less interest overall. Here are _ strategies you can employ to help reduce your household debt.
- Find out exactly how much you owe
Knowing the exact amount of debt you are carrying is important for coming up with a debt reduction plan. You can figure this out by either compiling all of your bills or calling your creditor and asking.
- Reduce unnecessary expenditures
Once you know where your money is going each month go through and tally up unnecessary expenses. Small items, like a daily latte from a fancy coffee shop each morning or going out for lunch at work, add up quickly and the funds spent on them could be better used to pay down your debts.
- Figure out how much you can afford
Once you know what your necessary monthly expenses are you can compare them to your household income and determine how much money you can put towards paying off your debts each month.
- Pay down your debts
We previously discussed two methods for paying down your debts, the “Snowball” method and the “Avalanche” method. Review both strategies and determine which is best for you.If you are feeling overwhelmed by your debt call Tim Lacroix today at 403.648.1541 to book your free, one hour Financial Planning consultation and visit timlacroix.com for more information.