Do you only refund the minimum on your credit card? Do you ever use a card to reimburse another? Are you paying your bills late? These are signs that your debt is becoming problematic. Here are five strategies, each with their pros and cons, to help you cope.
1- Stop debt
Cutting your credit cards is certainly the safest way to stop using them. This does not pay off your debts, but can help you to avoid making the situation worse. By making yourself pay in cash, you can also keep track of your expenses more easily. Depending on the state of your credit report, however, it might be more difficult to get one afterwards, but that can be a good thing.
2- Rethink your budget
After making your budget, you can better reduce your expenses. Or even get rid of some, like this subscription that you no longer use. Shifting your budget is without a doubt the most effective solution for long-term healthy finances. You will then live within your means, but this requires discipline and tenacity. In addition, when debts are large, this method must unfortunately often be combined with other solutions.
3- Increase your income
Working overtime, finding a second job, taking a roommate and finding more paying work can be solutions to increase your income. However, you should take into account the additional tax payable (and possibly the change of tax bracket), additional child care costs, transportation costs, etc. Also watch out for exhaustion.
Another way to access fresh money is to sell (at a fair price) jewelry, a second car, an RV, furniture or investments. It can even free you from debt entirely. This decision can be difficult, however, because of their sentimental value, for example. Also, depending on the goods sold, this can have an impact on retirement (investments) and taxes or lead to other costs such as a move.
5- Consolidate your debts
You could get a loan or line of credit from your financial institution to pay off all your other debts. As the interest rate will be lower than that of your credit cards, you will save. But obviously, you don’t have to incur other debts. In addition, if your credit report is not very bright, you will need an endorser.
If you need help, you can call a free budget advisor from a cooperative family economy association (ACEF). Sometimes the debts are unfortunately too large and the income too low to get out of it without a more radical solution. You could then turn to the consumer proposal or bankruptcy with the help of a trustee.