Debt is the stealth bomb that erodes financial stability and even relationships.
Debt piles up a little bit at a time and one day you wake up to find that most of your money is going to servicing debt instead of funding an enjoyable life today and a comfortable retirement tomorrow.
To get control of your debt, you need to uncover the real reasons for your debt issues by identifying the behaviour that sunk you deep in debt and take the steps that will keep you from sinking even deeper.
The first two steps to debt-elimination are these: Stop helplessly watching your debt mount and get proactive; stop spending too much. Here are more basic debt-elimination strategies:
• Complete a detailed financial review
Agree on financial life goals that both of you share, understand. Get serious about reducing your debt load by targeting bad debt like high interest credit or retail cards and setting up a debt consolidation/monthly debt reduction plan.
• Look long-term
Establish a realistic financial strategy for realizing the things that matter to you: saving for your kids' education and your retirement; paying down your mortgage; and other important life goals.
• Apply your financial plan
Your strategies could include:
— Establishing an emergency reserve using investments held within a Tax-Free Savings Accounts (TFSAs);
— Protecting your family with life, critical illness and disability insurance;
— Funding your children's education with Registered Education Savings Plan (RESP) eligible investments;
— Funding your retirement (and/or your partner's retirement) with Registered Retirement Savings Plan (RRSP) eligible investments.
These are general debt-reduction and money-saving strategies but your situation is unique to you and there will be others that can help relieve your debt burden and enhance your financial security.
So here's one more strategy that will work for you: talk to your professional adviser, who has the expertise and perspective to develop the perfect plan for you.
J. Kevin Dobbelsteyn is a certified financial planner with Investors Group Financial Services Inc. His column appears every Wednesday.