By Janice Desautels (photo by Chris Hoare)
Taking a vacation from debt is far less exciting than going away to a place you’ve never been – or is it? Are you in debt from credit cards, loans, lines of credit, mortgages? Are you in a place you’ve never been before, trying to navigate from one form of debt to another?
If the answer is yes, stop the bus and get off. The feeling of being in control can be just as energizing as a vacation.
If you don’t control debt, it will control you. Debt is a huge industry that needs to be fed consistently, and it waits for you around every corner. Debt steals your independence and your future – and the worse part of it is many of us have walked willingly into this situation, more than we care to admit. We have been conditioned to think that we can’t have the lives we want without “it” and that we need whatever “it” is right now.
But our life, if we’re lucky, is a longer journey than right now – and hopefully, if planned for, our retirement will be the ultimate vacation. So why would you work so hard now to supposedly live well now, only to have nothing to show for it and retire poor?
Herein lies the balance we must have throughout our financial lives.
Building a strong financial foundation is the answer. Part of that foundation is debt management. We’ve seen enough reports in the news that Canadian debt loads are worrisome. Ask yourself this question: if you didn’t get your next pay cheque, would you be able to purchase things like a bus pass or gas for your car so you could get to work? Or further to that, could you make your rent or mortgage payment?
If the answer is no, and it’s because there is no savings (and on top of that there are debt payments), then surely a course correction needs to occur.
The following steps will help you get started in taking the control back.
List all the debt payments you have. Tally up the total amount and the monthly repayment amount.
Determine the total cost of borrowing. Include the purchase price and interest charges paid up to now, and add the future cost if left unpaid. Warning: be prepared as this total is never good news!
Start your plan to take a debt vacation. Pick one payment to focus on, usually the smallest debt is the fastest to clear, and then the payments that were servicing it can be added to the next lowest debt payment.
Do not add to your debt. Live below your means – if you don’t have the money to spend, don’t spend it. Keep your credit cards at home; however, if you have to use them to buy something, the bill must be paid in full when received. If that isn’t possible, simply don’t make the purchase.
Any money left over should then go toward a savings plan. Getting out of debt may be the toughest job you’ll ever experience. It won’t be easy to change the bad spending habit, but your future life depends on it. There is no easy fix or strategy even though the debt industry may claim to have them. Take back your independence, focus, and succeed – because you are truly not free until you are debt-free.
Janice Desautels has been working with families and individuals for the last seven years helping educate in the field of financial literacy. She is a Certified Financial Educator with over 15 years’ experience in teaching and training adults. For questions or advice, please contact firstname.lastname@example.org.