December 16, 2014

By Margaret H. Johnson

5 sure fire ways to pay off your debt and avoid new debt this year

The New Year is approaching and you still haven’t reached your resolutions you set last New Year. Your debt hasn’t gone down much, or maybe has even gone up in the last year. So how can you get out of the cycle and get closer to debt freedom in the coming year? Here are 5 sure fire ways to pay down your debt and avoid new debt in 2015.

  1. Comb through your budget and review your actual spending over the last few months. Make sure your budget is accurate and truly reflects your money goals in 2015. If your goal is to pay down debt (and avoid new debt) then your priorities will be both debt payments and emergency fund. Trim fixed expenses where possible and reduce discretionary spending if necessary to give debt and emergency fund priority in your budget. Download our free budget worksheet (available in excel or pdf) to get started.

  2. Debt payments will be a major part of your budgeted spending this year, but don’t do this willy nilly without a solid plan. Decide on a strategy for debt repayment.

    1. Prioritize your debts to repay according to their cost, paying the highest interest rate debts first.

    2. Or begin by paying off the smallest debts first to gain quick traction on reducing the number of debts you have.

    3. Or make your own prioritized list for debt repayment.

    4. Another option is debt consolidation - where you combine all debts into one payment at a reduced interest rate overall. Read “Debt Consolidation 3 Ways” for your options with this.

    5. Whichever strategy you choose, try to reduce your current interest rate of your debts, whether you call them personally or use a licenced credit counsellor. It never hurts to ask, and it usually pays to ask.

  3. Building an emergency fund will be just as important this year as paying off your current debts, because an emergency fund is a debt prevention fund. It’s what keeps you from needing new credit this year when those un-budgeted costs inevitably pop up. Rather than pulling out your credit card or getting a payday loan for a plumbing emergency, you will be able to pay with your own cash. Having the money available takes some of the stress out of financial emergencies, and gets you out of the perpetual cycle of debt.

  4. To ensure your well planned strategy comes to fruition, automate your banking. Set up automatic debt payments and automatic emergency fund transfers for the day your paycheck is deposited so you know you will have the money and don’t have a chance to spend it elsewhere.

  5. When you are struggling with paying down debt and building an emergency fund to prevent new debt, one of the best things you can do to succeed is to earn more income. There are so many ways to earn some extra money, surely there will be one way that would suit you perfectly. Read “How to Earn More Income” for some great ideas. Dedicate some time in your schedule to make your side income a priority so you can speed up your journey to debt freedom.

If you follow these 5 steps this year, you’ll be laughing by this time next year.

Remember, if you are experiencing financial difficulties do not wait. Call Solutions Credit Counselling at 1(877)588-9491 or fill out our Debt Consolidation Questionnaire and get your Free Credit Counselling Advice today.

For more information visit Debt Canada - your Canadian credit education centre.

If you are a woman in debt, speak with Women and Money first. We specialize in helping women with their personal and business financeMoney management advice you can count on!

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