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How to recognize and overcome debt problems


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Debt repayment now represents about 14 percent of household disposable income in Canada. And with rising interest rates, Canadians may have to start shouldering even more debt.
 
With the financial stability of many on shaky ground, it’s more important than ever to recognize the early signs of debt problems so budding financial issues can be addressed before they become too big to weed out.

So, what are some of the early signs of debt problems?
 
Not knowing how much you owe
Debt can become unmanageable if you don’t have a clear picture of how much you owe and where your money is being spent.
 
The total amount of debt increases each month
Even if you accrue debt a little more each month including interest on outstanding balances (e.g. credit cards), it adds up. Quickly.
 
Using your savings for daily expenses
Treating your savings like an emergency fund, can throw your savings strategy off track, creating setbacks for future financial goals.
 
Relying on borrowing money or taking on new debt to pay off existing debt
Being stuck in a perpetual borrowing cycle maintains debt issues and doesn’t resolve them. Some debt repayment strategies can involve consolidating debt with low interest loans, however it’s always best to speak to a Meridian Advisor to understand the repayment strategy that will work best for you.
 
Experiencing a change in mood or losing sleep over expenses
The stress of losing control of your expenses can be overwhelming and affect sleep, productivity at work, and more.
 
Getting into arguments with family about money
Anxiety about your financial health can cause rifts in relationships between family and friends.
 
If you’ve thought, “Hey, that’s me” on any of the signs above, don’t worry just yet. It’s not too late to make a plan to harness your debt issues and get back on track.

 

Here are 5 steps you can take to overcome debt problems:

1. Make note of your debts
Write down all of your debts so you have a complete picture of what they are. From here, you’ll be able to accurately assess debt issues and come up with the best strategy to fix them.
 
2. Monthly budgeting is crucial
Come up with a monthly budget that starts by factoring in fixed expenses like your mortgage and car payment. Next assess your variable costs like groceries and clothing.
 
Once you fully understand your expenses, identify opportunities to save even if it’s in small amounts – they add up.
 
Do you really need Netflix and cable? Are there alternative ways to commute to work to save on fuel costs? Get creative and it will pay off.
 
3. Work on high interest debt
Pay down debts that carry the highest rates to avoid large interest payments. Getting rid of income-eating interest will free up more money to put toward getting back on track financially.
 
4. Be punctual
Do your best to pay your bills on time each month to avoid late fees or finance charges.
 
To help stay consistent, set up a bill payment schedule in your phone or on your computer that reminds you exactly when bills are due.
 
Work to pay over minimum monthly bill payments to reduce debt and help maintain or improve your credit score.
 
5. Seek advice
There’s no shame in asking for help. If you recognize the early signs of debt problems and need assistance, consider seeking the advice of a credit counseling service.
 
Speak to a Meridian Advisor to help assess your debt load and work together to come up with a plan to control it.

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