what are some effective tips to tackle my debt?

In light of the New Year, historically low interest rates and new mortgage rules coming into force next month, there has never been a better time to examine your current debt load to see how you can save more and spend less.

Following are some steps you can take to help trim your debt in 2011:

1. Create a budget and stick to it. Budgeting offers a step-by-step formula for figuring out how to best save your hard-earned money to reduce your debt load and decrease your money worries. Start by listing your household income, then your household expenses, and review your spending habits. Keeping receipts for everything that you purchase will enable you to accurately track where your money is going each month so that you can review and make necessary changes to your plan on an ongoing basis. Examine all areas of your life from entertainment to the type of food you buy, where you buy your food and clothing, and how and where you travel. Also look at your spending personality and make necessary adjustments. Are you a saver, a splurger, a spontaneous shopper or a hoarder? Become smarter with your money and avoid impulse buying. If you find you’re spending a lot of money in one area,

such as entertainment for instance, set aside a reasonable amount each month and prepare to stop spending money in this area once your budget has been exhausted.

2. Create or review your financial plan. Once you have created your budget, you can now develop a financial plan that maps out short- and long-term goals as well as emphasizes debt management. With a solid financial plan, you are less likely to leap before you look and make financial or investment decisions you’ll regret in the long run.

3. Pay off high-interest debt. Now that you’ve created your budget and financial plan, it’s time to direct those savings where they’ll do the most good in reducing your worst types of debt. While it’s a smart move to pay off your mortgage quickly, attacking high-interest debt such as credit cards and other unsecured loans should be your top priority – credit card interest rates can be in the high 20% range, while mortgage rates are currently around 4% and below. So if you have some equity built up in your home, it may be a wise idea to consolidate your high-interest debt into your mortgage. This will enable you to ease into 2011 with a clean slate. But it’s important to avoid racking up more high-interest debt once you’ve refinanced – to prevent a repeat of the debt worry cycle.



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Angela Slager

Angela Slager

CENTURY 21 Heritage House Ltd., Brokerage*
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