Is dealing with debt becoming a struggle? Since the Bank of Canada introduced another big rate hike last week, many Canadian homeowners are likely feeling the pinch of increased mortgage payments. While inflation and rate hikes can’t last forever, they are definitely causing stress for tons of people in the here and now. Canadians who find themselves in debt, thanks to rate hikes and inflation making the costs of consumer goods skyrocket, are looking for solutions. Here are some suggestions for dealing with debt.
#1 Try a budgeting app
Budgeting apps can be handy tools to help Canadians get a handle on their debt. They can really help you track your spending and lay out where your money is going, so you can make adjustments if needed. Most apps are fairly user-friendly. Mint is one of the best apps out there and one that I would recommend to people looking to control their debt. This app lets users link all their accounts to get a full view of their finances. You can personalize your budget, get notified of upcoming bill payments, and Mint will even categorize your transactions.
You don’t even need to be in debt to use a budgeting app. These apps are handy for people who want to save up for a future expense, or those who just want a picture of their spending habits.
#2 Avoid extra spending
If you have a variable rate, your mortgage payments are going to increase. It’s a guarantee. This, plus the cost of things like groceries and gas, means it might be time to be a bit stricter with your spending. Separate your needs from your wants so your money is going to the most important causes. This isn’t ideal or desirable, but it will help you stay afloat so you can enjoy your non-essential spending down the line.
You can look at your income and compare it to your essential expenses to see how much you need to set aside to make those payments. Doing these calculations before you start spending money on non-essential items can save you a lot of stress.
#3 Make payments by priority
Depending on your debts, you can organize them by how you want to pay them off. Higher interest debts will obviously accumulate more interest the longer you put them off, which will only add to your debt. Making the minimum payments on all your debts is important, especially the higher interest ones, so you don’t end up owing more in fees.
With that being said, don’t completely neglect your lower interest debts. If you only focus on your debts with the highest interest, you might pay those off just to find you’ve collected penalties for ignoring your other obligations. Instead of directing all your attention at one item, try to make minimum payments across the board.
#4 Consider a refinance
If you have a mortgage, you may be able to use your home to your advantage if you have some debts. Refinancing can let you access some of that equity to increase your cash flow. You might also want to extend your amortization period to allow for lower monthly payments in exchange for a longer term. As rates change, be sure to discuss a refinance with your broker to make sure the money you may save will be worth the process.
Dealing with debt can be tricky, but we can find ways to make it manageable. I’m dedicated to helping my clients get a handle on their debts. If you have any questions, I’m just a phone call or email away. You can book a call directly into my calendar below, or get in touch with me here.