Competitor: This article comes from Tom at CanadianFinanceBlog.com. See the original post – Are You Really Reducing Your Debt?.
Entry Category: Strategies for Getting out of Debt
Many of us say that we want to get out of debt. If you are in that camp, you need to honestly evaluate whether or not you are truly making efforts to pay down your debt. Do you have a plan to reduce your debt? Or is getting out of debt merely wishful thinking?
What are You Doing to Get Rid of Debt?
A recent survey conducted by Leger Marketing for the Bank of Montreal showed that half of Canadians expect to be out of debt in five years. In this study, these Canadians include their mortgages in their calculations. This survey has me wondering if these Canadians are in touch with reality. Will they really be out of debt in the next five years? Or are they being overly optimistic.
For the most part, it’s possible to be out of debt in that amount of time, as long as you have a plan. The reality, though, is that you need to make a concerted effort to get rid of your debt, paying it down aggressively. Think about the your finances, and what you are trying to accomplish. Answer the following questions to determine whether or not you are likely to be out of debt in the next few years:
- Do you pay more than minimum? The hard truth is that paying the minimum won’t get you out of debt in anything approaching a reasonable time frame. If you only pay the minimum payment, you could end up paying triple or quadruple what you originally borrowed, and it can take up to 10 years (or more) to repay your debt. If you only pay the minimum, you likely won’t be out of debt in five years.
- Have you stopped adding to your debt? Many people think that they are paying down debt when they make good-sized payments, and then use the card to buy more. It’s one thing to use a credit card and pay it off each month. It’s quite another to pay down $100 on your card and then spend $80. At that rate, you won’t be debt free any time soon.
- Are you actively finding ways to boost your debt repayment? Are you looking for new ways to pay down your debt? Maybe you sell some things from your attic, or take on an odd job or two. Perhaps you cut your spending and apply that to your debt. If you want to get rid of your debt as quickly as possible, you need to actively look for more money to put toward paying it down.
In the end, whether or not you will really pay off all your debt in five years depends on how you use your financial resources. Create a plan to pay down your debt, and you will find success. If you aren’t doing anything but thinking about how nice it would be to have no debt, and if you are only putting a small amount toward your debt reduction efforts, without a real plan, you will probably be in debt for a long, long time.