How to Reduce Your Debt to Improve Daily AffordabilityOct 23, 2018
Canadian parents have a lot on their plates and it looks like their debt load isn’t making things any better.
According to results from the recent BDO Canada Affordability Index, Canadian parents are more likely to struggle to afford everyday necessities, like groceries, utilities, clothing and transportation costs — compared to Canadians with no children.
Although, our Index found that even though Canadians with kids carry about the same average debt load as Canadians without kids, parents are more likely to say their debt load is overwhelming and they’re not sure what to do about it.
We know that parents from coast-to-coast-to-coast deal with debt, and that heavier debt can affect affordability for any age group. What steps can your family take to reduce its debt load and improve affordability in day-to-day life? Here are three good ones:
- Get the whole family involved in cutting costs
Kids don’t need to know all the details about family debt, but they can offer fresh ideas on how to reduce costs in the home. Getting the whole family involved can make the whole process of cutting costs a little bit easier.
Challenge the kids to help you reduce the monthly grocery budget by $100, or find free weekend activities. Any money saved can go towards extra debt payments or a rainy day fund.
Experiment each month, keeping the stuff that works and losing the stuff that doesn’t!
- Make sure those extra debt payments are working in your best interest
Putting any extra money towards reducing debt each month is a fantastic idea, but did you know there are a few ways you can make them work even more effectively?
Instead of spreading the extra money around to all of your debts, focus on one. Tackle your higher interest debt first, while you maintain minimum payments on your remaining debts. Once that debt is paid off, repeat the process, focusing on paying off your next high interest debt.
Are you motivated by smaller “wins”? Make those extra payments on your smallest debt first. Then tackle your next smallest debt, and repeat until you’re debt free.
These two options are commonly known as debt avalanche and debt snowball. The bottom line: find a debt repayment strategy that works for you and stick with it. Having a plan helps you stay on track.
- If the family budget is feeling overwhelmed because of personal debt, get help
Getting help with your debt sooner rather than later is always a good idea. Debt can cause stress — no one will argue that. Money problems can affect your work and home life — and they are a common reason for relationship breakdowns.
First step is to learn what debt relief options are available to help reduce or eliminate debt. If you’re struggling to do it on your own then speak to a debt help professional. An initial consultation with a Licensed Insolvency Trustee (LIT) is free and without obligation. An LIT will listen and work with you to develop the plan the best fits the needs of your family.
Certain factors that affect the affordability of living in Canada are beyond your control. Make sure you and your family are focused on the things you can control, such as working to reduce debt. Paying down your debt load is a win-win situation — you’ll pay less interest to your creditors and you’ll free up more money for day-to-day necessities and savings goals.