Are you juggling a lot of debt? Do you have multiple debt payments coming out…
If you’re worried about how you’re going to pay your bills each month but you’re not ready to seek professional help, there are DIY debt solutions you can try. While DIY solutions can be very useful, it’s important that you consider reaching out for professional help as soon as your debt starts to feel unmanageable. There’s no need to navigate your debt alone, a Licensed Insolvency Trustee (LIT) can walk you through a variety of debt relief options. And, the earlier you reach out for debt help, the more options you will have available to you.
DIY Debt Solutions
If you’re interested in using DIY debt solutions to track your finances, plan for your future, or pay down your debts, there are several strategies you can try.
Calculate your debt
You need to know where you are before you can get to where you’re going. Prior to creating a debt relief plan, dig into your numbers and find out how much debt you are really in. This won’t be a fun task, but it is necessary. If you’re serious about getting out of debt and you want to do it on your own, you need to know your numbers. You can use our online debt calculator to help you determine how much debt you have and how long it will take you to repay.
Get to the root of the problem
Once you know how much debt you’re really in, it’s time to understand the why. Why do you find yourself in debt? What is the primary cause? Maybe you lost your job or suffered a medical emergency. Perhaps your debt is due to a lack of budgeting and a habit of overspending. The purpose of this step isn’t to place blame or make you feel bad. The goal is to understand why you are in debt so you can put strategies in place to prevent it from happening again.
Contact your creditors
If you know you can’t make a payment, reach out to your creditor or lender as soon as possible. If you explain your situation, your lender may be willing to extend your payment deadline or work with you to find a different solution. Making a late payment or missing payments can lead to additional fees and can damage your credit score. As soon as you’re concerned that you might not be able to pay your bill, contact your lender.
Consolidate your debt
Debt consolidation is when you pay off multiple credit cards and loans with one large loan. While it won’t reduce your debt, it can help to simplify it. Instead of trying to manage multiple debtors with different interest rates and payment deadlines, when you consolidate, you only have to worry about one payment.
Consider a cash-out refinance
A cash-out refinance allows you to replace your current mortgage with a larger mortgage and take the difference in cash. The amount of money you can get with a cash-out refinance depends on how much equity you’ve built in your home.
For instance, if your home is valued at $300,000 and your remaining mortgage is $100,000, then you have $200,000 in home equity. If you can get a cash-out refinance loan for $150,000, then you can use it to pay off your $100,000 balance plus take the extra $50,000 in cash. You can then use this money to pay off other debts. Most lenders allow you to borrow up to 80% of the value of your home, but you should check with your specific lender.
While a cash-out refinance is a way to access a large sum of money typically at a lower interest rate than an unsecured loan, there is risk involved. If you fail to make your loan payment, you risk losing your home to foreclosure. The terms of your mortgage are also subject to change which means your monthly mortgage payments are likely to increase.
Create a budget
Think of a budget as a plan for your money. Rather than spending haphazardly only to wonder why you’ve run out of money before the end of the month, a budget allows you to decide how you want to spend your hard-earned dollars.
Your budget should outline how much money you make (income) and how much you intend to spend (expenses). The difference between your income and expenses indicates whether or not you have a surplus or deficit.
If you don’t have enough income to cover your expenses, it’s time to make cuts. While you usually can’t change your fixed expenses (mortgage, rent, insurance), there is often an opportunity to reduce how much you are spending on your variable expenses (groceries, clothing, subscriptions). To start tracking your spending, you can use our fillable income and expense worksheet.
Bring in more money
If you’ve done everything you can to cut your expenses and you’re still having a hard time paying your monthly bills, another option is to try and make more money. Yes, it’s easier said than done. Many people are working very long hours and still coming up short. However, if you have some room in your schedule and the ability to take on additional shifts or overtime, this can help fill in the gaps. Alternatively, you might consider taking on a second job or a side hustle as a temporary solution to help you pay off your debts more aggressively.
What to Do if DIY Solutions Are Not Enough?
If you’ve created a budget, reduced your spending, and tried a variety of other DIY solutions and you’re still struggling, it’s time to talk to a professional. You don’t want to destroy your credit score and create an unmanageable amount of stress before you seek assistance. Waiting too long to ask for help can greatly reduce your debt management options.
Speak to a Licensed Insolvency Trustee (LIT)
We understand that talking about your debt can be a very difficult thing to do. Many people grapple with feelings of embarrassment and failure. They don’t want to ask for help because they don’t want to talk about their debt. While these feelings are valid and completely understandable, as Licensed Insolvency Trustees, we are not here to judge. We are here to help. We know that bad debt happens to good people, and it is our mission to help you solve your debt problems.
At Adamson and Associates, it is our job to guide you through the different debt relief options available and to help you decide which one is right for you and your family. DIY options can be useful if you are still solvent and able to make your monthly payments. However, if you can no longer pay your bills and you’re struggling to keep your head above water, it’s time to reach out to a professional. There is no reason to do this alone.
A LIT is the only professional in Canada authorized to administer debt relief options like Consumer Proposals and Bankruptcies. While these options can sound scary, they are often the most effective solutions for those who are having a significant amount of financial difficulty and want a fresh financial start.
If you are worried about your debt, contact us today for a free, no-obligation consultation. We have evening and weekend appointments available to best fit your schedule. We are available to meet in person, for a virtual consultation, or over the phone at 519-310-5464.