10 ways to get out of debt

10 ways to get out of debt

From consolidating your debt to changing your spending habits, these tips will help you put your finances in order.

　

　

1. Consolidate your debt

Consolidate your debt

White says visiting your financial institution or credit union to consolidate your debts is a great first step. Often times, you can dramatically reduce the amount of interest you're paying and turn several payments into one, simple monthly payment.

However, White says this tactic comes with a warning. "Don't use your credit cards," she advises. If you've just consolidated your credit card debts but continue to use those cards, the debt cycle will only continue. "They haven't really solved the problem," White says. Once you've consolidated your debt, White recommends getting rid of excess credit cards, keeping only one or two, with low limits, for emergencies only.

　

　

2. Pay bills with highest interest rates first

Pay bills with highest interest rates first

White views a mortgage as good debt. It is also an ongoing payment, i.e., one that must be paid no matter what. Once your monthly mortgage bill is paid, look at your consumer debt and start paying off the bills with the highest interest rates.

Credit cards often charge ridiculously high interest rates, and you can wind up paying much more than necessary by sitting on those bills for too long. However, White says each case is unique. If you find yourself in too much debt, you should meet with a credit counsellor to figure out which options work best for your individual situation.

　

　

3. Pay more than the minimum payment

Pay more than the minimum payment

"If you flip your bill over, it'll tell you how long it would take to pay off your debt paying only the minimum," White says. "It's scary!" White advises consumers to ignore the minimum payment and instead pay as much as they can comfortably afford. This not only minimizes interest payments, but clears up bills quicker, allowing you to move on to the next ones.

　

　

4. Cut your expenses

Cut your expenses

Remember that, as White puts it, "Nothing is sacred." That means nearly anything can be cut from your budget when you are in debt. Cutting your expenses is the main concern for anyone owing more than they can afford to pay. "That is high up on my list of priorities," White says.

Consider eliminating cable, lavish vacations, clothes, unnecessary daily expenditures like expensive coffees, etc. Look at everything you spend your money on and start deciding which of these things you can do without. Every penny you can save up should be going towards your debt.

　

　

5. Make a spending plan

Make a spending plan

More conventionally known as budget planning, White prefers to call it a spending plan because, she says, the word budget can have a negative connotation. "People think of is as a diet," she explains. But the real goal is to make a plan for yourself so you know where your money is going and you can calculate how much you can afford to comfortably spend to pay your debt. This will help you take charge of your financial future and keep you in control of your spending.

　

　

6. Sell what you don't need

Sell what you don't need

With debt looming over your head, you will need to save as much money as possible. White advises to begin selling any assets that are not secured. Next, look at anything you may not be using. "If you have something you don't use, sell it, especially if it costs you money to keep."

Items like motorcycles and other secondary vehicles would be good examples of items that require costly upkeep. You may be pleasantly surprised to find out how much extra money, which can help pay off your debt, can be found among dust collectors at home.

　

　

7. Try to earn more money

Try to earn more money

If possible, White advises accumulating some overtime at work to help bring in more money, even if only temporarily. Any extra money can help. If you can't find extra hours at your current job, you can try seeking out a secondary part-time job at a grocery store or coffee shop, and use as much money as possible for debt. This option may not be suitable for everyone, especially if you have small children to care for, but it's something to consider whenever possible. Even very small amounts of extra money can help you kick your debt quicker.

　

　

8. Set realistic goals for paying off debt

Set realistic goals for paying off debt

White says consumers often plan to pay off debt with monthly payments that exceed what they can afford in the hopes of speeding up the process. "They're setting themselves up for failure," White says. This will only encourage more debt as you try to stay afloat.

Instead, she advises that you look at your income and see what you can reasonably afford and accept the length of time it will take to pay it all off. You can always seek the help of a credit counsellor if you're having trouble determining what your monthly payment should be.

　

　

9. Consider putting your tax refund toward debt

Consider putting your tax refund toward debt

Instead of using your income tax refund for a vacation (as much as you may need it), you should be using it to pay off your debt. Any and all extra funds should be used to pay off your debt before any other expenses. Lump sum payments will decrease your debt drastically, save you interest, and speed up the entire repayment process.

　

　

10. Replace bad spending habits with good ones

Replace bad spending habits with good ones

Don't just try to eliminate bad spending habits, White says. Replace them with better spending habits. Otherwise, you will find yourself in the same debt cycle over and over again.

One example White provides is eating out. Instead of purchasing expensive restaurant meals every day, replace that habit with a new one: learn to cook — buy groceries and prepare your own meals at home for much less. "This can really help make a difference in your spending, especially when you're in debt," White says. This tip is particularly useful not only in helping you clear away your debt, but in preventing you from getting yourself stuck in consumer debt again.

　

　

Your Assignment:

Hopefully these tips can help you get started. For in-dept solutions, it would be wise to consult with your bankers and create customized banking needs.