This month we are going to be doing a series of posts about debt reduction. To begin, we will discuss what you need to know about your debt before you decide on the debt reduction strategy that is right for you.
Find out exactly how much you owe
If you are the type of person who feels a sense of dread whenever you read the “amount owing” section on any of your bills you may be in trouble financially. In order to come up with a proper debt reduction strategy you need to first determine how much you actually owe. You can do this one of two ways: either compile all of your current bills or call your creditors and ask for the total. Once you have this information create a spreadsheet that shows you each bill, the total you owe, and what the interest rate is. Though taking stock like this can be intimidating it is essential to generating a sound debt reduction strategy.
Figure out what expenses are unnecessary
Next, track all of your expenses for one week. Do this by creating a separate spreadsheet to track your weekly spending, creating columns for each shop you spent money at and tallying all your expenditures. At the end of the week take stock of where your money goes. Things like your morning latte or grabbing fast food for lunch everyday aren’t good for your wallet at all, and should be cut or at least reduced. By eliminating unnecessary expenditures you can redirect that money towards paying off your debt faster.
Figure out how much you can afford
Now that you have reigned in your spending habits you can figure out how much you can afford to put towards paying down your debts. Now that you know exactly how much you owe, what the interest rates are and how much money you have left each month after bills and necessities you can determine how much money you can budget each month to pay down your debts.
Next week we will be discussing one of two debt management strategies you could employ.
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.