Milestone Mortgages is owned and operated by Arzina Ismail, who is licensed with TMG The Mortgage Group Albtera Ltd.
Steps For Reducing Debt
1. Set realistic goals
It takes time and discipline to pay off debt. Monitor your progress to help you stay on track. Plan where you would like to see yourself financially in the next 6 months, 12 months, and 5 years (or whatever time frame works for you). This will also help keep you motivated when your dollars go from negative to positive.
2. Cut or hide your cards for the short term and set a budget
Living on cash will force you not to overspend. Keep track of every single thing you spend your money on and create a monthly spending plan. There are many budgeting tools and apps available online to help get you started. At Milestone Mortgages, we can also help you plan a budget and go through your financial position.
3. Negotiate a better interest rate
Did you know you can call creditors and negotiate a lower rate? Yes, you can! A simple phone call to your credit provider and you may be able to get your interest rate brought down. This will allow more of your payment to go towards paying the actual debt down instead of creditor’s interest.
4. Best way to get out of credit card debt
After creating a budget, you should have a better understanding of how much extra money you can put towards debt after bills and making minimum payments on all other debts. But which one should you pay off first? There are a couple of options. The most popular approach is to put extra funds to the debt with the highest interest rate. This technique helps you maximize your payments and help you get out of debt the fastest. Once that debt is paid off, you can divert that payment to the next debt with the second highest rate.
5. Another debt reduction strategy
This strategy involves you to target the smallest debt first. All extra funds should be put towards paying off the smallest debt you have. The theory is to get one debt paid off as fast as possible to so you are motivated to keep moving forward. You also end up freeing up some cash which can then be put towards the next debt. And so on.
6. Earn some extra cash
There are so many ways to earn extra cash. From working overtime to baking birthday cakes, earning a little more cash can go a long way in getting out of debt and may actually be fun.
7. Refinance your mortgage
If you have enough equity in your home, you may be able to use that equity to consolidate your debt into your mortgage. This will leave you with one monthly payment and free up some extra dollars. The extra funds can then be saved for other investments or be added to your mortgage payments so you can rebuild the equity again more quickly.
8. Don’t let the debt takeover
Be sure that getting out of debt doesn’t consume you. Planning time for friends and family is very important as well. Having a romantic dinner at home with your spouse or going on a family bike ride a couple of examples that you can do that are also inexpensive. Getting out of debt does require sacrifice but remember to focus what is important to you also.
9. Save for ‘Emergency’
Setting aside some extra money each month in case of emergency is essential. In case your furnace breaks down in the middle of winter (it does happen in Alberta!), you will have the cash to replace it instead of resorting to credit cards or lines of credit, thus breaking the reliance on credit.
10. Earn points and invest
Once you are able to take control of your finances and live on a budget, you will be well on your way to meeting your goal of getting out of debt. However, after all your debt is paid off, where do you go from there?
Credit, good credit, is important to have in order to qualify for car loans, mortgages, etc. Get credit cards that earn you travel points or free groceries. The key is to pay off the entire borrowed amount every month or every time you use it in FULL so you don’t fall back into bad habits of overspending. It is also important to save and invest. Have your new found wealth make you money. Investing in a rental property is a great way to have someone else build equity for you. For more information on investment properties, click on the investment tab, or simply call us at Milestone Mortgages.
Milestone Mortgages is licensed with TMG The Mortgage Group