One step forward and two steps back… if this phrase describes your current financial situation, you are not alone! According to Equifax, the average Canadian carries $22,080.00 worth of debt, and this on top of any mortgage they have. This is up 3.6% from last year.

For those who are in debt, most feel that until the debt is taken care of, they need to throw any additional funds they have at their debt balance. The problem with doing this is that when unexpected things come up, as they always do, with no other recourse people are using their credit card to take care of it… which ends up creating the “one step forward and two steps back” scenario.

There is a way out of this: Three steps that you can incorporate in the new year to make 2019 a much more financially positive year.

1.    Track spending: If you don’t have one already, download a budgeting app if you have a smartphone, budgeting software if you strictly use computers, or simply grab a pen and paper and track the old-fashioned way. Many people don’t realize how much they are spending on incidentals until they start writing everything down and really seeing where their money is going. This is a great way to identify a little extra cash that can feed #2 of this plan.

2.    Build Savings: Yes, you should build savings even if you have debt. Unexpected things coming up are a part of life… special occasions… holidays… there’s plenty of events throughout the course of a year that can stretch your already stretched funds. Adopt a plan for saving and be consistent with it. After all, squirreling away just $20.00 a week can save you over 1000.00 in a year!

3.    Reduce debt: It’s not enough to just make a plan for savings; you also need to make a plan in your budget for reducing your current debt. Same as budgeting money to go to savings, do the same exercise for funds to pay down debt. If you can, try to budget higher than the minimum payment… which helps you get out of debt sooner. As you pay off something, add these budgeted funds toward the next item on your debt list. This helps reduce your debt even faster and avoid those interest rate payments.

Track… Build… Reduce. Give it a try in 2019 and see where you’re at this time next year!  

 

Image by Steve Buissinne from Pixabay