Many, many Canadians struggle with bad credit and bad debt levels from time to time. Some of them have a lot of debt that continues to grow and grow, giving the appearance that it isn’t going away any time soon.
For obvious reasons, this can cause a lot of worry and a lot of stress. One way to try and get out from under the pile of debt is to try and look for an effective method of reducing that debt that will be achievable and realistic for an individual’s particular needs and the uniqueness of their situation.
Even starting out small can help someone begin to lessen their debt – but coming up with a plan and some go-to steps is certainly the first step to getting into a larger debt reduction routine. In the meantime, if you are trying to lower your debt there are rules you can take to ensure your debt reduction plan begins now.
Here are 5 rules to live by to reduce your bad debt:
1) Devise a Budget & Stick to It
While it is likely that you have already heard this first rule at various times where financial matters are a topic of discussion – it can not be stressed enough that the art of budgeting should never be undervalued. In fact, being able to set a budget as well as being able to follow through and stick to it, is one of the best methods of getting your debt relief plan up ad running. Without doing so, you are more likely to continue to spend beyond your means, at which time, reducing your bad debt may prove to be next to impossible.
On the other hand, if you reassess your finances, your income and your expenses, you can create a new and improved budget and you can keep a close eye on what you are spending each and every time – as well as how much money is required for each transaction you will make. Again by being diligent and committed to sticking to a precise spending and saving pattern, you can help yourself to avoid impulse purchases and incidences of overspending – making it a a lot easier to keep your current debt levels at bay.
2) Maintain one Purchase Method
A second rule to abide by if you intend to reduce your debt levels as soon as possible is to aim to stick to one main method of spending. For example, you may choose to use your credit card for most transactions. Juggling too many credit cards or accounts can become too overwhelming, especially when you have a lot of debt – not to mentioned it makes it more likely that you may miss to overlook a payment here or there. In turn this can lead to higher debt and a bad credit score.
Alternatively, with only one credit card payment to make each month, instead of multiple ones you have a better chance of paying it off in less time and continuing to see your debt level go down instead of reaching higher.
3) Get a Low Interest Rate Credit Card
If you have one credit card you are using, often times having one with a low interest rate can help with your debt. With debt and current financial woes, it may also be likely that you are carrying a credit card balance from month to month, as opposed to paying it off each time. If so, then you will want to make things a bit easier to manage – and having to pay less interest is always a good position to be in.
Then, if you are spending solely on this one card and are paying off the minimum balance or a bit more than that – however not the balance in its entirety each month – you can also remain on a path to debt relief without also having to pay off a card with higher interest fees.
4) Aim to Pay off your Credit Card Balance in 6 Months
While striving to pay off your existing credit card debt, may seem daunting, another good rule of thumb is to try to keep your credit card balance for no longer than 6 months at a time. In the beginning this may prove be more difficult, however as you start seeing your debt balance go down – you can begin to implement this strategy into your financial routine.
Keeping this rule in mind, as you manage your spending and your credit card payment behaviour can help you improve your finances moving forward, and additionally your debt levels have the ability to lessen more and more over time.
5) Remember to Be Flexible
Lastly, while you are trying to remain structured in your budgeting skills and your payment habits, it is also just as important to add an once of flexibility into the process. While this does not necessarily mean that you will change your mind each and every month – however, having a flexible attitude can be applied to a more long-term financial approach.
Ultimately, this means that your financial priorities are likely to change as you move through life, reaching various milestones and this may mean that the credit cards you use or the type of savings plan you are engaged in will also change. Therefore, being able to adjust your budget, your type of spending method and your savings can help you achieve a greater degree of financial stability.
The reality is that debt can follow you at any age. As a result, being open to relying on different strategies in your financial management plan is always a valuable mindset to maintain. All in all, being flexible, yet sticking to a set of core financial rules to ensure your debt levels remain low and do not continue to rise is a very important approach to carry with you across the years.