Four Mistakes You Need to Avoid When in Debt
Did you know that the average Canadian household owes over $20,000 in non-mortgage debt?
Or that as a nation we’re giving up over 7% of our disposable income just to pay interest to our creditors?
Debt is a fact of life for many households in Canada.
But that doesn’t mean that we can’t take charge of our debts and proactively improve our circumstances.
No matter how much you owe, or to whom, there’s always a way to reduce the time spent repaying your debts and the amount you throw away on interest.
Do you want to get debt-free, or do you want to keep helping your creditors to turn a profit?
Only you can improve your situation, reduce the amount you spend on repaying your debts and prevent the stress of your debt from keeping you awake at night.
Here are four mistakes that, while very common and perfectly understandable, are best avoided if you want to better manage your debts and regain control of your finances.
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Mistake 1- Burying your head in the sand
There’s no denying it.
It can weigh heavily on our minds and make the prospect of checking the post or our email inboxes seem terrifying.
All too often we can develop the habit of piling one debt on top of another.
This can make us lose track of how much interest we’re paying, prevent us from prioritizing our highest-interest debts, knowing how much we owe, and understanding the fastest way to get free of our debts.
Not only does this make it easier for debts to spiral out of control, it also increases the psychological burden of your debt.
When we don’t address issues in our lives, they can metastasize in our minds, and become larger and more intimidating.
The longer this goes on, the more we can live in fear of our debts or labour under the mistaken belief that our debts are beyond our ability to control.
It’s important to understand that you are not alone.
Hundreds of thousands of Canadians just like you seek help in taking control of their debts every year.
Liberate yourself from the sleepless nights and the strain of dealing with your debts alone.
Mistake 2- Getting help from all the wrong places
While refusing to talk about your debts can be a mistake, turning to the wrong people for help can be just as big a mistake.
It’s important to know who’s qualified to give you the help you need and who is not.
While talking to your creditors can yield positive results, remember that there will always be a conflict of interest at play.
They want to recover as much of their debt as possible as quickly as possible.
The same goes for any collection agent, bank or bank-funded counsellor.
Be wary of unlicensed “Debt Consultants” too.
More often than not, they will charge a substantial fee for doing very little short of assigning you to a Licensed Insolvency Trustee.
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You should even be wary of advice from well-meaning but ill-informed friends and family members.
If you’re struggling with debts to the point of insolvency, only a Licensed Insolvency Trustee can let you know all of your options.
Mistake 3- Taking on more debt
We’ve been surrounded by easy access to cheap credit for so long that it can seem as though the only plausible reaction to debt is… more debt.
And unless you master the skills necessary to budget and put something into your savings account regularly, that’s all you’ll be able to do.
And as your credit rating plummets, your only option will be to take on high-interest short term forms of credit such as Payday Loans and cash advances on your credit cards.
But more debt is never the answer.
Even commercial Debt Consolidation Loans can be problematic.
While they can improve your credit score by effectively repaying your debts and replacing them with a single new one, they will not necessarily help you to break the cycle of relying on more credit and incurring more debt.
A Licensed Trustee can talk to you about better options like Credit Counselling, Consumer proposals or, where necessary, Filing for Bankruptcy.
Mistake 4- Keeping repayments to a minimum
Maintaining a good monthly cash flow is important for every household.
A big part of budgeting is ensuring that your monthly income is put to good use.
The more you have set aside to put into your savings, the easier it is to escape the need to rely on debt.
However, don’t make the mistake of selecting the minimum repayments on your credit cards in the mistaken belief that it will improve your monthly cash flow.
All it will do is prolong your debts, and ensure that you waste much more money on interest than you should.
A better option is actually to make savings elsewhere in your budget to enable you to pay more of your debts every month, thereby incurring less interest and getting debt-free faster.
Stick to the minimum repayments and your debts may take decades to repay.
Not sure which path to take? We’re here to help!
When your debts spiral out of control, it can make budgeting impossible, render saving a mere pipe dream and cause you significant stress.
Fortunately, we can help.
For over 20 years we’ve been helping Canadians from all walks of life to find a Licensed Insolvency Trustee and decide on the best debt relief option to suit their needs.
We can advise on the best option to repay your debts faster while waiving all interest and changes, and even writing off a substantial portion of your principal debt.
With our help, you can get completely debt-free in as little as 5 years, without incurring the hefty fees charged by unlicensed Debt Consultants.
Want to know more?
Call us today on (877)879-4770. We’ll be happy to arrange a free, confidential and 100% zero-obligation callback.