When is the topic of debt comfortable, not viewed as a problem, and sometimes even embarrassing? Right now!
Debt is like all things in life, it depends on your perspective; your strategy. If you start with a goal and the end in mind! Knowledge, ingenuity and ‘stick to the plan’ discipline, can transform those debts of yours into real wealth.
Let’s learn how:
1. The Debt List:
Stop avoiding the truth, because it is guaranteed that what you don’t know, can hurt you financially. Your list needs to include everything:
* credit cards
* car loans
* small recreation loans
* student loans
* fuel or retail loans
To make sure you haven’t missed anything, request a copy of your credit report, (you can order it from www.equifax.ca for $23.95) and compare it with your list to insure it’s accurate. How closely these two lists match, will be a good indication of how aware you are of your personal debt load.
2. Make a Budget:
This is a chore for most people. The reward for making the effort, though, should be enough incentive to follow through. Imagine receiving a bill, only to find $0 owing! This is your reward for developing a strategy, a budget. We all have luxury spending in our lives that we can probably live without. Determine what yours is, and consider putting that money towards your highest interest rate debt instead. This is the plan:
* pay off highest interest debt with the smallest balances ASAP
* never stop using your ‘debt’ money for paying debt until it grows into wealth!
Let me explain; as you start eliminating loans, redirect the money and put extra on your bigger loans. So, if you had $170.00 you pay every month for appliances from Sears, and now they’re paid off, take that $170.00 and add it to your credit card, student loan, vehicle, and eventually your mortgage. The goal is to have as many $0 balances as possible, but to never diminish the amount of money you put towards debt.
So if your current budget has $3000 going towards various loan payments, this amount is never going to change. It’s simply going to become more and more concentrated, until you’ll find yourself with one final debt, likely your mortgage.
3. Pay More Than the Minimum:
Minimum payments are designed to keep you in perpetual debt; you consistently paying interest to your lenders. Good for the lender, bottomless pit for you! Pay as much as you can afford, and determine to get your balance to zero, one loan at a time.
4. Consider Debt Consolidation:
As your local mortgage expert, I can help determine if you could save money clumping all of your loans into a refinanced mortgage. This could end up saving you interest, and it feels less overwhelming in the long run. You won’t need to consider month to month how to organization which loan to knock down next.
5. Think Mortgage Free:
Never stop using your ‘debt’ money for paying debt, until it grows into wealth! Now you’re down to only one lender, and it’s suppose to take a few decades to be rid of this one…unless you keep that debt money paying debt. Every extra dollar you put on your mortgage, goes directly towards principle, meaning there’s less interest to calculate the following month. Talk to your lender about bi-weekly accelerated, or prepayment privileges. They’re available, but it’s up to you to use them to your advantage. The sooner you stop paying money to interest, the sooner your money can start growing into wealth.
6. Invest For Your Future:
With a smaller or paid out mortgage, you’ll find extra money to start investing. Consider purchasing a revenue property that will earn ongoing rental income, as well as asset appreciation.
Questions about your mortgage options? Give me a call!
Blogged by Elise Hildebrandt
AMP Mortgage Associate Broker, Lic# 316103 @ The Mortgage Centre
Brokerage Lic #31547 Saskatoon, Saskatchewan