Be creative: gamify repayment, negotiate bills, reduce expenses and find extra income. Try DIY but get advice if you need help.
Q: My partner and I had to rely on credit these last few months to get by. I wasn’t getting my normal paycheques because I got hurt playing hockey and just as I was ready to get back to work, we went on strike. My partner went back to school two years ago so all we had to get by on was her student loan money and part-time work. I don’t know what we would have done if we didn’t have lots of room on our credit cards, but now I don’t know what we’ll do because we have more credit card debt than we can manage. We feel stuck and stressed because our entire financial safety net is gone. Is there anything you can suggest? ~Bryan
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A: Life has a way of presenting unexpected challenges that can significantly impact our financial stability. For many, these obstacles come with a substantial financial burden, making it difficult to maintain a sense of security. When our traditional income sources fail us due to job instability, health setbacks, or other unforeseen circumstances, credit cards can feel like a lifeline, providing much-needed assistance in the moment. However, the temporary relief of relying on credit can quickly turn into a daunting financial struggle, as the accumulating debt becomes hard to manage.
Debt can lead to feelings of anxiety, stress, and helplessness, making it difficult to find a clear path forward. However, with effective strategies to not only manage but also overcome the burden of debt, it’s possible to pave the way for a more secure and stable financial future. With that in mind, here are practical tips to help you regain control of your finances.
Understand the importance of a budget
The word budget tends to stir up a range of emotions, splitting people into two camps: those who love it and embrace it, and those who leave it and avoid budgeting at all costs. But before you decide where you stand, consider a third approach: learn it. This can be the key difference between merely planning what to do with your money and making progress toward your goals.
When you find yourself in a difficult financial situation, creating a new budget might be the last thing on your mind. The stress and uncertainty can make it seem overwhelming to sit down and confront your finances. However, this is precisely how to regain control.
Identify a debt repayment strategy
There are numerous strategies to tackle debt, so rather than stressing over finding the perfect one, choose one strategy and start. As you go, you can adapt and incorporate other methods that best suit your needs.
For example, a DIY approach might involve making minimum payments on all credit cards and for the one with the highest interest rate, reallocating your extra funds to this one. If quick wins motivate you more, focus on paying off the smallest debt first, regardless of interest rates, to build momentum. With either method, once one debt is paid off, redirect those funds to the next debt in line, continuing until all debts are paid off.
Challenge yourself to stay motivated
Dealing with debt can feel overwhelming, but incorporating some fun can make the journey more manageable and a bit more engaging. For instance, you can gamify your repayment process by setting mini challenges or creating a bingo card with different repayment milestones. Work with your partner to accomplish these challenges and achieve milestones within a set tim eframe. Reward yourself with something small when you reach your goals. Debt repayment apps, like a payoff planner, can also keep you motivated and committed to making steady progress.
Don’t underestimate the importance of savings
When you’re focused on directing every spare dollar toward debt repayment, setting a savings goal and working on it at the same time might seem like an afterthought. However, building up savings is a crucial yet often overlooked aspect of managing debt. Without an emergency fund, a single unexpected expense can derail all your hard-earned progress in reducing what you owe.
Try the envelope system or cash stuffing
If you find yourself running short in a category, consider ways to reduce spending in other categories or boost your income. Temporary income options include side gigs like babysitting or dog walking, freelancing — such as teaching English online — driving for ride-hailing or food delivery services, selling unneeded possessions, or monetizing a hobby. For more steady, long-term income, consider getting a second job, taking in a roommate, moving to a more affordable living space, or becoming a one-vehicle household.
The bottom line on dealing with debt
Staying positive and proactive is important when managing debt. If you need help from your creditors during this challenging time, reach out and explain your situation. Many creditors are willing to work with you and may offer support through temporary hardship programs that lower your payments and/or interest rates. Every bit helps, and by prioritizing repayment, exploring debt relief options, and finding ways to increase your income and decrease your expenses, you can get relief from the burden of debt. Taking these proactive steps and making informed decisions will help you develop essential money skills, transform your financial situation, and build a strong foundation for long-term success.
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