The holiday season is a time for celebration and joy. However, for many individuals in Mississauga and the Greater Toronto Area (GTA), it can also bring financial stress. With the additional expenses that come with December, feeling overwhelmed by financial worries is not uncommon. That’s why it’s important to prioritize your financial well-being and consider adding a comprehensive debt checkup to your holiday to-do list.

Conducting a debt checkup offers several advantages that can positively impact your financial stability. It allows you to regain control over your finances, alleviating stress, and anxiety. While it may seem counterintuitive to focus on debt during the holiday season, taking stock of your financial situation is essential, especially as the temptation to overspend looms. Many people find themselves burdened with debt overload when their credit card bills arrive in January. Proactively addressing your debt can help you start the new year with a clearer financial outlook.

So where do you start?

Assess Your Debts

Begin by creating a list of all the debts you are dealing with, including the amount you owe, the current interest rate, and the minimum payment. These debts may include credit card debt, personal loans, car loans, and mortgages, each with its terms, conditions, and implications for your overall financial situation.

Strategies for Paying Down Debts

A checkup gets you to identify high-interest debt and develop a strategy to pay it down effectively.

When it comes to prioritizing which debts to pay off first, there are two common strategies: the highest balance method and the highest interest rate method. The highest balance method involves targeting the debt with the largest outstanding balance and paying it off first while continuing to make minimum payments on other debts. This approach can provide a sense of accomplishment as you see a large debt eliminated.

On the other hand, the highest interest rate method involves focusing on the debt with the highest interest rate first. By tackling high-interest debt, you can save money on interest payments over time. This approach is often recommended for individuals who want to minimize the overall cost of their debt. The strategy you choose should align with your financial situation and goals. It’s important to evaluate your debts, their interest rates, and your available resources to determine which approach makes the most sense for you.

Managing Debt: Tips and Strategies

  1. Create a Budget: Developing a budget will help track your income and expenses, providing a holistic view of your financial situation. It enables you to identify areas where you can reduce spending and allocate funds toward debt repayment. Here is an online Budget Planner that allows you to create your budget and save it online. You’ll also get useful tips, and it will help you figure out your next steps with suggestions. You’ll get charts that show you where your money is going, and you have the option to compare your budget with those of other Canadians like you.
  2. Reduce Non-Essential Spending: Analyze your monthly expenses and identify areas where you can cut back on non-essential spending. This could include dining out less frequently, reducing entertainment expenses, stopping subscriptions you no longer use, or finding more affordable alternatives for certain products or services. Making small adjustments to your spending habits can free up extra money for debt repayment.
  3. Increase Your Income: In addition to cutting expenses, consider opportunities to increase your income, such as taking on a side job, asking for a raise at work, or exploring other ways to generate additional income. The extra money can be used to accelerate your debt repayment and achieve your financial goals faster.
  4. Avoid New Debt: One of the most important strategies for managing debt is to avoid taking on new debt whenever possible. While it can be tempting to use credit cards or take out loans to cover expenses, this only adds to your existing debt burden. Instead, focus on living within your means and finding creative solutions to meet your financial needs without relying on credit.
  5. Set Financial Goals: By establishing clear financial goals, you provide yourself with a roadmap for achieving long-term stability. Whether it’s paying off a specific debt or saving for a major purchase, having concrete objectives keeps you motivated and focused.
  6. Explore Debt Consolidation Options: Debt consolidation can be a viable option to streamline multiple debts into a single, more manageable payment. This approach simplifies your financial obligations, boosts your cash flow, reduces interest rates, and provides greater convenience.

    Consider the case of Joan and Yousef, who had a combined debt of $550,000 from their mortgage ($500,000), car loan ($25,000), and credit cards ($25,000). By leveraging their home equity, they rolled all their debts into a new $557,813 mortgage. Despite incurring a fee to break their existing mortgage, the payoff was worth it. They now enjoy an additional $980 in monthly cash flow. Joan and Yousef plan to use some of their improved cash flow along with tax returns and bonuses to accelerate their debt repayment, providing them with more optimism about their financial future.

    While breaking your current mortgage incurs penalties, you want to assess whether the potential savings outweigh these costs. By working with a professional like top-rated Mortgage Broker Joe Purewal, you can determine the feasibility of refinancing or explore other options like a second mortgage that also provides flexibility and financial breathing room. A second mortgage is a good option if you don’t want to break your mortgage and lose your current low rate. You consolidate your non-mortgage debts into the second mortgage and then pay down both first and second mortgages.
  7. Stay Committed to Your Plan: Once you’ve developed a strategy for managing your debt, it’s essential to stay committed to it. Consistency is key when it comes to debt repayment. Set up automatic payments, create reminders, and maintain your commitment to your plan, even when faced with unexpected challenges. Staying disciplined and focused will help you make steady progress toward becoming debt-free.

Joe Purewal, Mortgage Broker, and Cash Flow Specialist

Joe Purewal, a cash flow specialist, and top-rated Mortgage Broker can provide valuable assistance in achieving financial comfort and stability. Work with Joe when you have questions or need assistance with your credit score, to assess the feasibility of debt consolidation, and should you need to better understand alternative financing solutions that offer flexibility and breathing room. With Joe’s guidance, you can make informed decisions about your mortgage plan and overall financial strategy.

Remember, prioritizing a comprehensive debt checkup, implementing effective debt management strategies, and seeking professional advice can help you secure financial stability and start the new year on a strong footing. The gift of financial comfort is within reach for everyone in Mississauga, Toronto, and the GTA. Contact Joe today to embark on your journey toward a brighter financial future.