A painless way to cut back on expenses
With the current economic uncertainty, many people are looking for ways to reduce expenses. A relatively painless way to reduce your monthly expenses is to have a second look at the way you’re managing your debt.
Over time, most of us take out a variety of loans for different purposes. These can include things like credit card debt, car loans, home renovation loans and, of course, the mortgage. And if you have more than one loan, you’re most likely paying a different interest rate on each loan. One of the easiest ways to reduce your monthly interest costs is to consolidate your debt at the lowest rate. Typically, your lowest-rate debt will be a loan that is secured by an asset, such as your home.
If you have sufficient equity built up in your home, consider switching to a product that allows you to access your equity, such as a home-equity line-of-credit. Then, use this line of credit to repay your higher-interest loans. In this way, you’ll be bringing all of your debts together into a single account, at a single rate. Some line-of-credit products even allow you to track debts separately within the account so you can continue to keep track of interest costs and repayment separately. Not only will debt-consolidation save you interest but it will make it easier for you to keep track of what you owe and how you’re progressing in paying it down.
Reducing your monthly expenses is one way to deal with economic uncertainty – and it doesn’t have to be painful. By borrowing smarter you can reduce your interest costs and increase your cash flow each month.
Do you have a plan for debt elimination?
When most people think about retirement planning, they think of building a retirement nest-egg through RRSPs and pension plans. While these are key pieces of the puzzle, it’s important not to forget about another important element of retirement planning – debt elimination. After all, the less you spend on interest payments, the more you can allocate to your retirement savings.
A debt-elimination plan doesn’t have to be complicated. But you should have one or you’ll likely be in debt longer than you have to. There are a few simple strategies for getting out of debt sooner, such as:
- Building extra debt payments into your budget.
- Consolidating all of your debts at the lowest rate possible.
- Using your income and savings to automatically reduce your debt (without giving up access to that money).
When you’re planning for retirement, don’t forget about the impact that your debt has on those plans. With a strategy for becoming debt-free sooner, you may even be able to retire earlier than expected.
I’d be happy to help you develop a debt-elimination strategy that complements your overall retirement savings strategy.