START TRACKING YOUR SPEND
Get to know where you spend, how it makes you feel and what really matters when it comes to your money!
Let's stop pretending that being good at money means you need to be good at math. Instead, let's listen to our body and our mind.
Debt is an ordinary reality for many Canadians. In fact, we lead the global pack in terms of household debt. While household debt may not say much in terms of our future economy, it makes you quickly realize that you are not alone if you currently hold debt, as a consumer or otherwise.
In a recent Instagram poll, nearly 50% of my followers acknowledged that they are currently repaying their debt. Of the 50% on the other side, debt may be inevitable at some point in the future.
Paying off debt gets a bad reputation for being restrictive, all-consuming, and never-ending. The way I like to think of it is that if your debt payoff method resembles a fad diet, it’s setting yourself up for failure and likely continuing the never-ending debt loop.
All of these things are red flags and should be avoided:
A restrictive plan that budgets the bare minimum and leaves no room for fun or unanticipated expenses
A time-intensive plan that has you working double-time to increase your income
Setting a date that your debt has to be paid off that is unrealistic for your situation
A debt payoff method needs to be sustainable and shouldn’t put your life on hold. Expenses for the things you love should be kept and your time valued. Your debt payoff schedule should be tailored to your lifestyle and not the other way around – drastically altering your lifestyle to pay off debt. If you take these things into account, you’re more likely to stay motivated and ultimately succeed.
Before you set a debt payoff schedule, I recommend sitting down with a glass of wine and three months of your bank statements to analyze what money is coming in and where it’s going. Are you currently saving, breaking even, or going into more debt? The answers to these will determine how much you need to increase your savings from now on. You must meet your minimum monthly debt payments, and you’ll greatly benefit from lower interest payments and a shorter time frame if you can put down more.
The most accessible place to start is with your fixed expenses – these are costs that come out of your account every month, such as utilities, cable, phone bills, and subscriptions. This is because a one-time cancellation or price negotiation will continue forever and requires no ongoing decision-making.
Call your cable company or phone provider and try to negotiate a lower deal. It’s certainly possible, and companies will often give you a discount if you’ve been a loyal customer. The worst they can say is no. If you struggle with confidence negotiating, check out the previous Mixed Up Money article titled ‘How to Negotiate Monthly Bills.’
The next step is looking at monthly subscriptions. Are you using these services as much as you thought you’d be? Probably not. Cut the ones you haven’t used enough to justify and keep the ones you enjoy on an ongoing basis.
The same goes for all expenses. Look through your statements and think back to when you made each purchase. How were you feeling then, and how does it make you feel now? Are you still happy with your purchase, or are you feeling buyer’s remorse? A sustainable savings plan removes things we may be buying for the wrong reasons and keeps the things we genuinely love.
Although this may not be an option for everyone, and it may not always feel like the right time to explore new opportunities or ask for more money, another way to increase your savings is to increase your income.
You can do this by negotiating a raise at your current job, leaving for a higher-paying job, or taking on additional jobs or “side hustles.” You know your circumstance best and what route should be taken for your particular situation.
Side hustles have become all the rage because of the rise of digital products and services. You can “hustle” from the comfort of your home and get paid for it. The key to knowing whether a side hustle is manageable is figuring out the time commitment.
Again, running yourself into the ground each week isn’t sustainable and is sure to make you dread your debt payoff journey. Check out this list of 48 ways to make extra money in your spare time in Canada if you think a side hustle may be right for you.
Once you’ve found that sweet spot of monthly savings that you can put towards your debt, it’s time to start your plan. It’s easy to have only one form of debt, such as student loans since your savings have only one place to go, but what if you have multiple? For example, a student loan, credit card debt and a line of credit? In this case, you might not know where to send your money.
There are several methods showing ways to divide up your income among your debt to maximize impact. Here are two of my personal favourites:
The debt avalanche method involves making the minimum payments across all outstanding debt balances and putting the excess amount toward the debt with the highest interest rate, like a credit card.
This method is excellent if you can stick to it because it will save you the greatest amount of interest and reduce the time it takes you to pay off in the long run. It does, however, require discipline and looking at the bigger picture because you may feel like you’re chipping away at your debt without making much progress for a while.
The debt snowball method involves making the minimum payments across all outstanding debt balances and putting the excess amount toward the debt with the smallest balance first, no matter the interest rate.
Although this method does not reduce your interest rate as the debt avalanche method, some people find it more motivating because you go from four forms of debt to only one in a short time. This can create a greater sense of accomplishment and a greater purpose to progress towards your goals.
Although some personal finance experts feel strongly toward one method or the other, the “right” method is the one that works for you.
Debt is very emotional. There may be debt that carries a higher emotional weight than others. It may not make sense to pay off that debt considering the numbers alone, but it may make sense for you to feel good and ultimately be successful in your journey.
Paying off debt is no easy feat and requires tremendous amounts of discipline and support. Talk to family, friends, and an online community.
One fantastic resource that I read and would recommend to all those paying off debt was fellow Canadian Shannon Lee Simmon’s book called Living Debt-Free: The No-Shame, No-Blame Guide to Getting Rid of Your Debt. Shannon is a Certified Financial Planner that helps clients with their money every day. You probably wouldn’t think that someone with her knowledge and experience could be in debt, but in reality, she was.
In the book, Shannon describes how she felt like a failure when she went into debt after launching her business. Now looking back, she doesn’t regret the debt itself, only the shame and guilt that she attached to it. She wished that she had been easier on herself because debt is inevitable for many of us. How you choose to navigate those periods emotionally and intentionally is what matters more.
Second, the founder of Mixed Up Money, Alyssa Davies, wrote The 100-Day Financial Goal Journal for anyone who is sick of feeling behind when it comes to their money situation. Rather than pick up the typical personal finance book about how to pay off your debt by living life bare bones, this modern diary can get you on the right track with your financial situation, without having to skip the fun parts of what money is really for: to be enjoyed.
In other words, if you care about your money or want to care more about your money, I highly recommend this journal.
Make sure that you’re surrounding yourself with people that encourage you and understand your goals. There is a fantastic debt-free community on Instagram. Some of my favourite creators talking about their debt-free journey are @sometimessensible, @literallybrokeblog, and @babeonabudgetblog.
You will conquer your debt and come out the other side. There is no one-size-fits-all strategy for how that happens, only that you make it across the finish line.
Oh no, you missed the live webinar! But, good news: Mixed Up Money is pleased to share a resource for anyone planning for a future child or family.
Mixed Up Money is pleased to share a free resource for anyone looking to cut back on non-essential spending. My most-requested product is these monthly calendars to share on your Instagram story, use as a phone background, or print off to track your spending habits.
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