We live in a world where you may be easily led to believe that crippling amounts of debt are just a part of life. Whether it is by taking a loan that you don’t know how you will pay back, accepting credit cards from your bank or retail stores, or going a little bit crazy on your most recent shopping spree, these all can make you feel that you need to go into debt to improve certain aspects of your life. This couldn’t be farther from the truth. When you understand your money and finance it correctly, you will realize that you can do all these things without having to take on insurmountable amounts of debt.
Don’t get us wrong. Debt is not a bad thing. In fact, debt helps build good credit when managed correctly, which can be a valuable asset when looking to make a large purchase. It becomes problematic when you treat your credit card like it’s Monopoly money. When it comes to debt, you should never take on additional debt without some form of a concrete plan on how you will be able to pay it back.
Banks, car agencies, realtors, and other financial institutions will always be happy to offer you more credit. It’s an inevitable temptation, and you should always be on high alert. Start by asking yourself these questions:
- Do I need that new credit card?
- Is it essential for me to move right now?
- Will I be able to pay these balances off?
- Can I afford this along with all of my other expenses?
The answers to these questions should serve as a guiding star when making your decision.
If this advice is already too late, and you are currently struggling with debt management, we are here to help. We scoured the web for what the experts have to say about it, and we want to share with you the advice that we have found.
Pay Your Bills On Time
This may seem obvious, but it is one of the biggest issues plaguing people at the moment. According to a recent QuickBooks survey for business owners, “76% said they must address late payments before they could focus on growth, and 89% of surveyed businesses said late customer payments have set back their company’s long-term growth goals” This demonstrates the inability of people and customers to make payments on time, which should be one of their priorities as well as the impact it has on the economy’s status.
These numbers showcase the financial situation that the world is going through. The constant inflation is making North Americans live in a day-to-day financial situation where the ability to think about the future is a luxury, not a right. When it comes to debt management, you should aim to come up with a strategic payment plan, where you will be faced with the least amount of time to pay it back possible. Remember, the longer it takes you to pay it back, the more money you will owe in the end.
Resist the Temptation to Open Another Credit Card
Credit cards are not a toy. If you want to reduce your debt, you should not be taking more credit cards than you can handle as some misguided attempt to get free money. While there is no magic number that is the correct amount of credit cards, due to the fact that each situation is different, you should always operate within the limitations of your current financial status. Investopedia echoes this point saying, “Even having two credit cards can be one too many if you can’t afford to pay your bills, don’t need them, or don’t plan to use them for some purpose.”
Start Tracking Your Spending
The best way to keep track of your income-to-debt ratio is by tracking your spending. There are countless ways to do so through apps, a pen and paper, a spreadsheet, or even your bank depending on which one you use. Don’t just track these numbers, though. Use them to make strategic changes for the better. Financial expert, Adnan Feroz, noted “By making these small cuts or sacrifices in your daily routine, you’ll be amazed at how much money you can save.” Just like anything else, small and consistent changes are the key to long-term success.
Go for a Consumer Proposal
If you are from Canada, this is likely your number one option for dealing with debt. As defined by Hoyes, “A consumer proposal is a legally binding agreement between you and your creditors to repay a percentage of what you owe in exchange for full debt forgiveness. A consumer proposal is a proceeding under the Bankruptcy and Insolvency Act and is administered by a Licensed Insolvency Trustee.” This can be a great option to alleviate some of the debt you may be struggling with, if you qualify for it.
Last Resort? File Bankruptcy.
We want to begin by offering a disclaimer that this is not an ideal situation, as the long-term implications of this can be devastating. However, believe it or not, sometimes filing chapter seven bankruptcy has benefits to it depending on how unrelenting your debt is. Find Law says that “Filing for bankruptcy is a complicated, emotional process. It takes more work and time than most people realize, but it can also be the right solution for significant debt issues and a fresh start.” It may be worth considering as a last resort if you have nowhere else to turn.
There are a variety of issues that average citizens are faced with everyday, not the least of which being financial hardships. We hope that these tips will help you get your debt under control or steer you away from getting into it in the first place.