How can a person successfully pay back multiple creditors on time, every month, while having enough money to spend and save?
Fifty per cent of Canadians don’t pay their monthly credit card statement in full. We get it – paying off debt isn’t effortless, and the fact that debt is so easily accumulated makes it hard. How can a person successfully pay back multiple creditors on time, every month, while having enough money to spend and save? It seems impossible. However, aside from cutting expenses and budgeting your money, these three strategies could help you prioritize your spending and set you free from debt.
Strategy 1: Pay Off Small Debt First
Referred to as the “snowball method”, making large payments on your smallest debts while paying the minimum on larger debts will clear out what you owe quickly. Once you’ve paid off one small debt, move to the next smallest and eventually all you’ll have left to is your larger debts. This method makes budgeting and financial planning easy, as it allows you to focus on paying back one debt at a time instead of juggling multiple. Make sure you keep making minimum payments on your other debts – don’t forget that your interest rates will continue to accumulate.
Strategy 2: Consolidate Your Debt
If you have a lot of debt from multiple lenders, consolidating it might be a good option if you’re having a hard time keeping track of what you owe. It’s hard to juggle different debts. However, applying for a personal loan, a line of credit or a balance transfer card means you only have to pay back one lender instead of multiple. This option is great for saving money, as consolidating your debt means that you’re only required to deal with one interest rate. If you’re interested in this option, click here to learn how we can help.
Strategy 3: Prioritize Paying Off High Interest Debt
Interest is the amount of money that you pay for borrowing money, and it can be a huge set-back when you’re trying to pay back your creditors. If you have a lot of debt with high interest, making minimum payments can be a lengthy pay-back process, and not to mention, discouraging. If you prioritize your high interest debt, known as the “avalanche method”, you’ll clear your larger debts first, which minimizes the amount of accumulated interest that you’re required to pay. If this is the route you to choose to take, ensure that you’re making minimum payments on your smaller debts too.
Debt is like weight loss – it’s easy to gain and hard to lose. If you’re stressed out about the amount of debt that you have, it’s important to understand the options available to you. Whether you choose to pay back small debts first, consolidate what you owe or prioritize paying off high-interest debt, take advantage of these strategies and we guarantee you’ll be debt free sooner than later.