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DIY Debt Repayment Plan
Debt is a reality in today’s society. Almost everyone has at least a little, and most of us have more than that. If your debt has become unmanageable and you can no longer make your payments then it might be time to speak to a professional about your options. Licensed Bankruptcy Trustees can help you with filing for Bankruptcy, but they can also present you with alternatives such as a consumer proposal. However if your debt has not reached the level where you think you need professional help, but you do want to pay it down, then you can create your own debt payment plan.
Step 1 – Make a list of all of your debts, the current balance, your minimum monthly payment, and the interest rate.
Step 2 – Prioritise. Focusing on paying off one debt at a time will significantly speed up the debt repayment process. Rank your debts in the order you would like paid off. Starting with the highest interest rate and moving to the lowest will save you the most money in the long term, however some people like to start with the smallest debt they have to get the ball rolling and give themselves a sense of momentum.
Step 3 – Create a monthly budget including the minimum payments of all your debts and allocating your spare money to the repayment of your priority debt. How strict you chose to be and how much money you chose to allocate to the cause is up to you, but obviously bigger payments mean a shorter time.
Step 4 – Move through your list. Continue living with your budget and piling all your extra money into your priority debt until it is paid off, then move onto the next debt on your list. Continue this way until you are debt free. This can take a long time dependent on how much money you are allocating. Make a rough estimate when you begin your plan so you have a realistic idea, don’t expect it to work over night.
Step 5 – You are debt free, now what? Since you are used to living with your budget consider putting that extra money into your savings. If you were being very strict with yourself you can ease off a little, but continuing to set aside a portion of your income makes good financial sense and it can provide a buffer to stop you getting back into debt in the future.