By Rate Supermarket, Special for USDR.
A new year is around the corner, but Canadians are stuck in the same old debt rut; the desire to pay down a lingering credit burden consistently tops the list of annual resolutions.
And it’s no wonder – the amount of debt held by Canadian households steadily grew in 2014; the national debt-to-income ratio (including mortgages, loans and consumer credit) hit 162.6 per cent* in the third quarter, with Canadians owing a total of $1.5 trillion!
The numbers may be daunting, but there’s a silver lining for consumers; the new year is the perfect time to turn those credit-crunched finances around. RateSupermarket.ca suggests these proven steps to tackling credit card debt, and starting 2015 off on a strong financial foot.
Step 1: Divide and conquer
The gifts may be unwrapped and the feast devoured… but the price of holiday festivities can last long into January. It’s time to face reality and determine how much you’ve really spent this season.
Find those credit card and loan statements to get an idea of the outstanding balances and the interest rates each of them are charging. This will help you get an understanding of how much you owe and will make it much easier to set a budget.
Step 2: Build debt repayment into your budget
Entering the new year with a detailed plan for monthly spending and debt commitments can help you adhere to the right financial path. Here are a few tips for building that budget:
- List your monthly debt commitments and the interest charged for each. Focus on repaying highest-interest debt first
- Review your total after tax income
- Keep track of what you’re spending your money on each month
- Shop with a list to help avoid impulse purchases when you’re out grocery shopping or at the mall (or better yet, avoid the mall altogether… at least for a while).
- Still coming up short every month? Revisit that budget and further reduce your costs
Step 3. Take down your biggest debts
Once credit cards are under control, shift focus to your largest debts; the mortgage, for most Canadians. Make reducing your overall mortgage top priority by taking advantage of prepayment options, moving to accelerated payments, and comparing your mortgage rate to ensure it is among the most competitive in the market.
Click here for three simple steps to saving on your mortgage.
Step 4. Carry the best credit card
Not all credit cards are created equal – and choosing a card with competitive features can help achieve your financial goals. For example, earning regular cash back rewards on gas and groceries can offset weekly household costs. Prone to carrying a balance? Eschew a rewards card altogether and effectively address your debt with a low interest credit card option.
Click here to be matched with the perfect credit card, based on your spending habits.
Step 5: Ask for help!
If you’d like help managing your debt, you can always consult a financial planner or adviser. There are also credit counseling agencies, many of which are not-for-profit organizations that specialize in helping people manage their debt. A quick online search can help find a local credit counsellor near you.
About RateSupermarket.ca ( www.ratesupermarket.ca )
Over 7 Million Canadians have found their best rate for personal finance products on RateSupermarket.ca. Launched in 2008, RateSupermarket.ca is Canada’s largest and most comprehensive rate comparison site, offering visitors transparent access to the best mortgage rates as well as credit cards, bank accounts, insurance quotes and GIC rates.