3 Signs It’s Time to Reduce Your DebtDec 21, 2016
Have you thought about your financial priorities for 2017? Not only is the new year a time to create personal resolutions, it’s also a great time to focus on your financial goals, including creating a plan to reduce debt. With the basic costs associated with living, such as groceries and hydro on the rise, and many in Ontario struggling to manage the debts they carry, this year it is especially important to focus on your financial health. Here are three signs it’s time to resolve to reduce your debt in 2017.
You feel overwhelmed
In a recent study, approximately four out of every 10 Canadians polled said they felt financially maxed out and anxious about the debts they owed. Eleven per cent even indicated that they felt they would never be free from their debt burden. Experiencing feelings of anxiety or stress is a clear sign that the debt you carry has become problematic and could even be causing you physical and emotional issues.
You’re living paycheque to paycheque
Almost half of working Canadians report that they are currently living paycheque to paycheque as a result of mounting personal debt and a weak economy. A quarter of those polled even indicated that they would have a hard time managing if an emergency financial situation occurred requiring $2000 or more. Living paycheque to paycheque as a result of debt is certainly worrisome and is also a clear sign that it’s time for a concerted focus on debt repayment and reducing your debt.
Your debt is preventing you from focusing on your other financial priorities
In addition to causing you stress and anxiety, your debt may also be preventing you from focusing on other important goals such as saving for retirement or building your emergency savings fund. This is the case for over half of all Canadians between the ages of 35 to 54. Although dealing with debt should be a top priority, it’s problematic if it is all-consuming and leaves little room for your other financial goals.
A good rule of thumb to follow is the 50/20/30 financial rule that states that 50% of your income be put towards essentials such as bills, housing costs and debt repayment, 20% of your income be put towards savings and 30 percent towards discretionary spending. If debt is taking up more of its share in your overall budget, it’s time to get it back under control.
If you’ve determined that reducing debt should be a priority for you, it’s time to time create specific goals to help you do just that. If you aren’t sure where to start, the Financial Consumer Agency of Canada (FCAC) provides a helpful online Financial Goal Calculator to help you out. By answering a few questions related to your needs and financial priorities, you can create solid goals that will provide guidance as you work towards meeting your financial objectives.
If you are still feeling overwhelmed by your debt after creating and implementing your financial goals, make it a priority to seek advice about how to reduce debt from a trusted professional. Depending on your situation, you may want to visit a not-for-profit credit counsellor or make an appointment with a Licensed Insolvency Trustee (LIT). To learn more about the roles and responsibilities of credit counsellors and Licensed Insolvency Trustees and how they can assist you, please visit the FCAC website.
Is reducing debt one of your priorities for 2017? Join in the conversation and share your financial goals for the new year with BDO Niagara Falls using the hashtag #BDODebtRelief.