Money & Career
30 tips to reduce your debt
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Money & Career
30 tips to reduce your debt
Whether it’s credit card bills or a line of credit, many of us are carrying debt and trying to get control of our finances. In fact, a recently released report shows that the average Canadian’s nonmortgage debt is up $739 since the first quarter of 2012, totalling $26,768 – the highest per-person debt level since the credit bureau started tracking the data in 2004.
The key to turning those numbers around is to make lifelong spending changes, rather than quick, dramatic ones that won’t last, says Laurie Campbell, CEO of Credit Canada Debt Solutions, a nonprofit organization that provides families with credit counselling. She compares the process to a diet. "You often hear about people who have lost huge amounts of weight only to gain them back again. It has never resonated as a lifestyle change," she explains. Here are 30 ways to lose your debt – and keep it off.
1. Write down your goals
"The main thing is that you have got to commit," says Campbell. Sit down and identify specific goals, then write them down.
2. Shop around for an interest rate
Put your debt somewhere cheap, but make sure it’s reputable, says Amanda Mills, a financial therapist at Loose Change in Toronto. "Shop around for an interest rate just like you would shop around for shoes." Make some calls and let your bank know you’re looking for a lower interest rate. "Usually the bank wants to keep you, so they’ll offer you one."
3. Build your 'savings' social networks
Start building up your online social networks to find savings, suggests Anna Waters, founder of the Canadian deals community Bargain Moose (bargainmoose.ca). "Search for your favourite stores on [Facebook and Twitter] and have a read of what they have to offer." Also check out Waters' Twitter account, @bargainmoose, to get info on Canadian stores offering deals on items such as food and clothing.
4. Pay bills on time
Here’s a tip from TD Canada Trust: Use your bank account’s features to help pay bills on time. Getting the bills delivered electronically and setting up automatic payments can help you avoid incurring late charges and damaging your credit rating.
5. Never pay full price
"Never pay full price," says Patricia White, executive director at Credit Counselling Canada. When making a big purchase (such as a computer), negotiate to get additional items (such as software or a warranty) at a lower price or even thrown in free.
6. Ask for marked-down prices on big-ticket items
When you are buying big-ticket items, such as cars, appliances and furniture, ask if the store has any display or older models with marked-down prices, suggests The Smart Cookies' Guide to Making More Dough (Vintage Canada, 2009).
7. Use your loyalty points on things you need
Save up loyalty points for something you need and remember to redeem them when you reach your goal, recommends Minnow Hamilton, a mother of two and cofounder of SavvyMom.ca.
8. Think before you buy
Before making a large purchase, ask yourself whether that money would make a better investment elsewhere – in your child’s RESP, for example. "Business and financial planning are exactly the same," says Arlene Dickinson, CEO of Venture Communications and costar of "Dragon’s Den." "You have to ensure you are putting your dollars to the right use and that you’re investing in areas with the most reward and potential."
9. Only shop for groceries once a week
Shop for groceries only once a week and always bring a list to avoid buying things you don’t need, says Tanya Silvonen, a home economics teacher in Saanichton, B.C. "I write my grocery list on one side and the meals that I want to make on the other side." Toward the end of the week, plan soups, stews and dishes like shepherd’s pie to use up leftovers.
10. Switch to an accelerated biweekly mortgage payment plan
Switch from a monthly to an accelerated biweekly mortgage payment plan, advises Jackie Woodward (the Mortgage Girl), a mortgage specialist at TMG The Mortgage Group in Edmonton. When you're paying every 14 days (every time you get a paycheque), two months of the year you will be making three payments instead of two, helping you pay off a little more without even missing the money. Add an extra prepayment of $100 each month and you can cut a 25-year mortgage down to 17 years.11. Turn outgrown kids stuff into cash
Sell the things your kids no longer use – clothes, toys, whatever – to a resale store for cash or store credit, or post items online on eBay or Craigslist.
12. Do you really need that gym membership?
Check out your municipal fitness facilities before renewing your gym membership. You could find free or discounted access to aerobics classes, tennis courts, swimming pools and other recreational facilities.
13. Never pay full price again
Don’t settle for paying the regular price on flowers, computers or appliances, says Steve Schaffer, CEO of Offers.com, a website for finding online promotions and coupons. He says you can usually find discounts of at least 10 percent on these items online.
14. Get free financial advice
Get free financial advice. Nonprofit companies such as Credit Canada Debt Solutions offer financial counselling, and many companies provide a similar service through their employee assistance programs.
15. Focus on small cost-cutting measures at home
Focus on small cost-cutting measures at home. Install a low-flow showerhead and shorten the time you spend in the shower. If your family sticks to four 15-minute showers a day using a low-flow showerhead, you can bring the cost of bathing down from $625 per year to $177, according to Hydro Quebec.
16. Do you really need a car?
Consider what it really costs to own a car. Look at using car-rental or car-sharing options (such as zipcar.ca and autoshare.ca) instead of owning a vehicle. And, although public transit may cost well over $1,200 a year, that can be just a tenth of the cost of owning a car when you factor in gas, insurance, parking and maintenance costs.
17. Sell those unused gift cards
Turn gift cards you’ll never use into cash. At cardswap.ca, you can exchange unwanted gift cards, or buy new ones to get 10 to 40 percent off at stores where you shop.
18. Limit credit card use
Lower the limit on your credit card, says Brenda Tye from Oshawa, Ont., who dug herself out of $20,000 worth of debt. She suggests not using any credit cards if you can.
19. Research credit card features
Comparing the rates and features (such as cash back) of different credit cards can help you find the right match for you. Visit fcac-acfc.gc.ca and click on Credit Card Tools.
20. Borrow books at the library
Get a library card. The same books, DVDs and magazines that you have been spending hundreds of dollars on can be borrowed without spending a dime. Just remember to return everything on time to avoid overdue fines.
The key to turning those numbers around is to make lifelong spending changes, rather than quick, dramatic ones that won’t last, says Laurie Campbell, CEO of Credit Canada Debt Solutions, a nonprofit organization that provides families with credit counselling. She compares the process to a diet. "You often hear about people who have lost huge amounts of weight only to gain them back again. It has never resonated as a lifestyle change," she explains. Here are 30 ways to lose your debt – and keep it off.
1. Write down your goals
"The main thing is that you have got to commit," says Campbell. Sit down and identify specific goals, then write them down.
2. Shop around for an interest rate
Put your debt somewhere cheap, but make sure it’s reputable, says Amanda Mills, a financial therapist at Loose Change in Toronto. "Shop around for an interest rate just like you would shop around for shoes." Make some calls and let your bank know you’re looking for a lower interest rate. "Usually the bank wants to keep you, so they’ll offer you one."
3. Build your 'savings' social networks
Start building up your online social networks to find savings, suggests Anna Waters, founder of the Canadian deals community Bargain Moose (bargainmoose.ca). "Search for your favourite stores on [Facebook and Twitter] and have a read of what they have to offer." Also check out Waters' Twitter account, @bargainmoose, to get info on Canadian stores offering deals on items such as food and clothing.
4. Pay bills on time
Here’s a tip from TD Canada Trust: Use your bank account’s features to help pay bills on time. Getting the bills delivered electronically and setting up automatic payments can help you avoid incurring late charges and damaging your credit rating.
5. Never pay full price
"Never pay full price," says Patricia White, executive director at Credit Counselling Canada. When making a big purchase (such as a computer), negotiate to get additional items (such as software or a warranty) at a lower price or even thrown in free.
6. Ask for marked-down prices on big-ticket items
When you are buying big-ticket items, such as cars, appliances and furniture, ask if the store has any display or older models with marked-down prices, suggests The Smart Cookies' Guide to Making More Dough (Vintage Canada, 2009).
7. Use your loyalty points on things you need
Save up loyalty points for something you need and remember to redeem them when you reach your goal, recommends Minnow Hamilton, a mother of two and cofounder of SavvyMom.ca.
8. Think before you buy
Before making a large purchase, ask yourself whether that money would make a better investment elsewhere – in your child’s RESP, for example. "Business and financial planning are exactly the same," says Arlene Dickinson, CEO of Venture Communications and costar of "Dragon’s Den." "You have to ensure you are putting your dollars to the right use and that you’re investing in areas with the most reward and potential."
9. Only shop for groceries once a week
Shop for groceries only once a week and always bring a list to avoid buying things you don’t need, says Tanya Silvonen, a home economics teacher in Saanichton, B.C. "I write my grocery list on one side and the meals that I want to make on the other side." Toward the end of the week, plan soups, stews and dishes like shepherd’s pie to use up leftovers.
10. Switch to an accelerated biweekly mortgage payment plan
Switch from a monthly to an accelerated biweekly mortgage payment plan, advises Jackie Woodward (the Mortgage Girl), a mortgage specialist at TMG The Mortgage Group in Edmonton. When you're paying every 14 days (every time you get a paycheque), two months of the year you will be making three payments instead of two, helping you pay off a little more without even missing the money. Add an extra prepayment of $100 each month and you can cut a 25-year mortgage down to 17 years.11. Turn outgrown kids stuff into cash
Sell the things your kids no longer use – clothes, toys, whatever – to a resale store for cash or store credit, or post items online on eBay or Craigslist.
12. Do you really need that gym membership?
Check out your municipal fitness facilities before renewing your gym membership. You could find free or discounted access to aerobics classes, tennis courts, swimming pools and other recreational facilities.
13. Never pay full price again
Don’t settle for paying the regular price on flowers, computers or appliances, says Steve Schaffer, CEO of Offers.com, a website for finding online promotions and coupons. He says you can usually find discounts of at least 10 percent on these items online.
14. Get free financial advice
Get free financial advice. Nonprofit companies such as Credit Canada Debt Solutions offer financial counselling, and many companies provide a similar service through their employee assistance programs.
15. Focus on small cost-cutting measures at home
Focus on small cost-cutting measures at home. Install a low-flow showerhead and shorten the time you spend in the shower. If your family sticks to four 15-minute showers a day using a low-flow showerhead, you can bring the cost of bathing down from $625 per year to $177, according to Hydro Quebec.
16. Do you really need a car?
Consider what it really costs to own a car. Look at using car-rental or car-sharing options (such as zipcar.ca and autoshare.ca) instead of owning a vehicle. And, although public transit may cost well over $1,200 a year, that can be just a tenth of the cost of owning a car when you factor in gas, insurance, parking and maintenance costs.
17. Sell those unused gift cards
Turn gift cards you’ll never use into cash. At cardswap.ca, you can exchange unwanted gift cards, or buy new ones to get 10 to 40 percent off at stores where you shop.
18. Limit credit card use
Lower the limit on your credit card, says Brenda Tye from Oshawa, Ont., who dug herself out of $20,000 worth of debt. She suggests not using any credit cards if you can.
19. Research credit card features
Comparing the rates and features (such as cash back) of different credit cards can help you find the right match for you. Visit fcac-acfc.gc.ca and click on Credit Card Tools.
20. Borrow books at the library
Get a library card. The same books, DVDs and magazines that you have been spending hundreds of dollars on can be borrowed without spending a dime. Just remember to return everything on time to avoid overdue fines.
21. Spend less each day
Spend $1.50 less each day, suggests Community Financial Counselling Services in Winnipeg. Not buying that coffee, bottle of water or chocolate bar will add up to $45 a month or $548 a year.
22. Use coupons
Take advantage of coupons. You can find them online,
in stores, on receipts – anywhere, says Lina Zussino, cofounder of GroceryAlerts.ca in Victoria. Stay motivated to use them by calculating your savings at groceryalerts.ca/coupontracker. In less than four months, Zussino saved $800.
23. Ask for discounts
Ask for discounts. Write to companies and inquire if they can help you buy their products for a little less. You’ll likely get discounts worth more than the average coupon.
24. Try to clear your credit card debt
Check out the payment calculator at fcac-acfc.gc.ca to compare different ways to clear your credit card bill. Paying $100 a month on a $1,000 bill with an 18 percent interest rate will allow you to be debt-free in 11 months – and pay $700 less than if you were to make the minimum payments, which would mean 10 years of paying off your debt.
25. Go shopping in your own closet
Instead of hitting the mall for new clothes, reinvent some of those old favourites that have seen better days, suggests Phillip Bloch in The Shopping Diet: Spend Less & Get More (Gallery, 2010). "Sometimes it’s about altering an outfit with easy solutions, such as changing the buttons on a blouse or taking the sleeves off a sweater."
26. Do basic home repairs and renos yourself
Learn how to do some basic home repairs and renos yourself, encourages Deanna Marcy, a stay-at-home mom and creator of the blog moneysavingmomcanada.com. She recommends taking advantage of free sessions offered at big-box stores that teach everything from weatherizing your home to installing ceramic tile.
27. Review your financial goals monthly
Review your financial goals once a month to see your progress. Go to cewc.ca/financial-calculators and use the Benefit of Spending Less calculator to see the return you can get from your new good habits.
28. Save, save, save
Start saving – even when you're in debt. "It’s a muscle that needs to be flexed," says Mills. "You need to learn how to do it." Set up an automatic withdrawal to help yourself save without even thinking about it.
29. Consolidate debt
Try to put all of your debt in one place, but don't reduce your payment, says Stephanie Holmes-Winton, an advisor, radio columnist and CEO of The Money Finder (themoneyfinder.ca) in Halifax. When your debt is spread out over a bunch of accounts, it’s hard to monitor. "If you can unify a line of credit, three credit cards and a mortgage in one place, you can focus more easily on paying them all off," she says. "And when you see it shrinking, you’re more motivated to keep on track."
30. Go on a cash diet
"Go on a cash diet for at least 30 days," says Holmes-Winton. Take out an agreed-upon amount of cash each week (on the same day, no advances and no exceptions!) and use it for the controllable expenses, such as groceries, eating out, kids’ activities and entertainment. It’s easy to spend money without thinking about it when you use plastic. Seeing the money come out of your pocket can be a real wake-up call.
Spend $1.50 less each day, suggests Community Financial Counselling Services in Winnipeg. Not buying that coffee, bottle of water or chocolate bar will add up to $45 a month or $548 a year.
22. Use coupons
Take advantage of coupons. You can find them online,
in stores, on receipts – anywhere, says Lina Zussino, cofounder of GroceryAlerts.ca in Victoria. Stay motivated to use them by calculating your savings at groceryalerts.ca/coupontracker. In less than four months, Zussino saved $800.
23. Ask for discounts
Ask for discounts. Write to companies and inquire if they can help you buy their products for a little less. You’ll likely get discounts worth more than the average coupon.
24. Try to clear your credit card debt
Check out the payment calculator at fcac-acfc.gc.ca to compare different ways to clear your credit card bill. Paying $100 a month on a $1,000 bill with an 18 percent interest rate will allow you to be debt-free in 11 months – and pay $700 less than if you were to make the minimum payments, which would mean 10 years of paying off your debt.
25. Go shopping in your own closet
Instead of hitting the mall for new clothes, reinvent some of those old favourites that have seen better days, suggests Phillip Bloch in The Shopping Diet: Spend Less & Get More (Gallery, 2010). "Sometimes it’s about altering an outfit with easy solutions, such as changing the buttons on a blouse or taking the sleeves off a sweater."
26. Do basic home repairs and renos yourself
Learn how to do some basic home repairs and renos yourself, encourages Deanna Marcy, a stay-at-home mom and creator of the blog moneysavingmomcanada.com. She recommends taking advantage of free sessions offered at big-box stores that teach everything from weatherizing your home to installing ceramic tile.
27. Review your financial goals monthly
Review your financial goals once a month to see your progress. Go to cewc.ca/financial-calculators and use the Benefit of Spending Less calculator to see the return you can get from your new good habits.
28. Save, save, save
Start saving – even when you're in debt. "It’s a muscle that needs to be flexed," says Mills. "You need to learn how to do it." Set up an automatic withdrawal to help yourself save without even thinking about it.
29. Consolidate debt
Try to put all of your debt in one place, but don't reduce your payment, says Stephanie Holmes-Winton, an advisor, radio columnist and CEO of The Money Finder (themoneyfinder.ca) in Halifax. When your debt is spread out over a bunch of accounts, it’s hard to monitor. "If you can unify a line of credit, three credit cards and a mortgage in one place, you can focus more easily on paying them all off," she says. "And when you see it shrinking, you’re more motivated to keep on track."
30. Go on a cash diet
"Go on a cash diet for at least 30 days," says Holmes-Winton. Take out an agreed-upon amount of cash each week (on the same day, no advances and no exceptions!) and use it for the controllable expenses, such as groceries, eating out, kids’ activities and entertainment. It’s easy to spend money without thinking about it when you use plastic. Seeing the money come out of your pocket can be a real wake-up call.
| This story was originally titled "30 Ways to Lose Your Debt" in the February 2013 issue. Subscribe to Canadian Living today and never miss an issue! |
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