Back in the Black - By: Molly Wider

If it's been a long time since your finances have seen anything but red, you're not alone. In 2009, the Certified General Accountants Association of Canada released a shocking report on the state of finances in Canada. According to the report, Canadians have reached an all-time debt high of $1.3 trillion dollars. At the time of the report, about $900 billion of that debt was held in mortgages and about $400 billion dollars was held as consumer debt. Regardless of how you count it, though, debt loads like that spell one thing-we need to get our spending under control.

The problem is-again according to the report-we're not. Some four in 10 Canadians surveyed said their debt load was on the increase. But getting debt under control, even managing to keep money in your pocket, saving for a rainy day, or a house, or a vacation, or anything, isn't as hard as it seems.

The first rule of debt reduction is to figure out who you owe, how much you owe, and what interest rate you're paying on the debt. Basically, before you can get back in the black, you need to know how deep you are in the red. Make sure you count every single debt, from lines of credit, credit cards, or wherever you have an outstanding balance.

Then you need to decide which debts to pay down first. You can either pay debts off one at a time, from highest interest rate to lowest, or spread your money over some or several of the highest interest debts and pay them down together.

Another tactic can be to pay one debt off altogether-regardless of whether it's a high or low interest debt. The advantage of this approach is that a quick pay off can help jump start your enthusiasm to get back in the black when you see a debt disappear quickly, and help give you stick-to-it-ness for larger debts that may take more time to pay off.

The next step to help you back to black is a budget. A budget can tell you where your money needs to go every month, and help you resist impulse buys that got you into trouble in the first place.

A tougher step is to stop carrying credit cards. Even if you feel you must have at least one credit card with you, keep it in your vehicle, locked in your glove compartment. And don't take cards into stores, or when you're window-shopping. That will buy you some time to resist impulse purchases.

So, find out the total amount of your debt load, make a pay down plan, budget your money, and stop carrying credit cards. These four simple steps can make you one of the six out of 10 Canadians who aren't increasing their debt loads this year.

About the Author

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