Canadians’ Debt Levels Still a Concern

Debt levels in Canada have been of great concern to officials for some time now. The general perception is that people in financial trouble are wildly irresponsible with their money, deadbeats, or both. While there are certainly people like that out there, the truth of the matter is that a large percentage of honest, hardworking folks are carrying around debt levels that far exceed comfortable levels. Increasingly, people are relying on such sources of easy cash as payday loans, credit cards, and lines of credits just to get by from month-to-month, with no tangible source of financial relief on the horizon to wipe away those debts.

According to Statistics Canada, for every dollar of disposable income they have, Canadians owe about $1.67. That is a substantial amount and leaves many living their lives with very little margin for error. Unfortunately, life constantly throws unexpected things our ways, like repairs, replacements, even lawsuits. Not having money on-hand to deal with such issues can lead to even bigger problems. Those may not only result in financial ruin, but declines in both a person’s health and mental health.

The main takeaway is that we need to return to the days when people’s lives were funded only by their cash flow and credit was something you used solely in times of emergency. Of course, in our consumer culture, we are constantly bombarded with advertising stating how much we need certain things, almost none of which are absolutely necessary for leading a comfortable and successful existence.

One thing that has saved some consumers is the increasing willingness of companies to negotiate proposals where the debtor would only have to pay back a portion of what they owe. This has helped reduce the number of personal bankruptcies from what they might be, though these also remain distressingly high.

New Years Resolutions: Financial Health

debtprisonA current survey on New Year’s resolution revealed that the top items on the people’s list include financial and health resolutions. If you are one of the millions of people who are committed to be more financially responsible this year, are you also getting ready to get rid of all those debts? A similar survey from Credit.com suggests that more than 50% of those people who are determined to have some financial resolutions put more importance on paying off their credit card debts at the soonest possible time.

Credit cards are undoubtedly efficient and convenient partners when it comes to our major expenses. However, credit card related debts have been identified as one of the main reasons why a person could get a low credit rating. Credit card spending can get out of hand quickly, and yet most, if not all of the credit card companies offer more lenient payment terms. As a result, interests easily compound until it reaches an amount that a debtor can hardly afford. Paying for credit card debts could eventually mean spending for things you never had, due to the bloated interest on your original debt. With this, it only makes perfect sense why majority of the Americans want to put their credit card debts on their priority list for this year.

Like any financial decision, paying debts in bulk will not come easy. Some people may even need financial counseling in order to take that leap. But, if you are truly determined to scrap a huge bulk of your credit card debts this year, here are some practical things that you can do.

1. Re-align your budget

Coming fresh from the holidays with some bucks to spare, it’s relatively easy to think of paying all the debts. This is always easier said than done. While it is completely right to stay off-debt for the new year, it is also crucial to make sure that you have sufficient budget to get you through the year. Paying off credit card debts faster than usual will certainly compromise your usual budget, thus the need for re-alignment. Determine which expenses you are willing to compromise, or if possible eliminate. Remember to include in your budgeting the other outstanding debts that are not necessarily urgent.

2. Negotiate with your credit card companyexhausted

You do not have to bear the burdens of debts on you own. By negotiating with the credit card company, you may still be able to reduce payments for other fees, especially the extremely bloated interest rates. Most of these companies have generous offers for clients who commit to paying more than their monthly payment fees.

3. Have a fixed timeline

Be clear with how long you really want to accomplish your goals of being free from credit card debts. Realistically, you can give yourself three to six months to accomplish this. With a good negotiation, you can pay everything in a span of six months without worrying about the interest rates.

As they always say, a credit card is both the friend and enemy of your finances. With responsible handling, it can definitely be a friend. But, when things start to go out of hand, it’s important to start committing to a reform right away.