Once you’ve completed your budget, it’s time to nail down a plan of action to tackle your debt, says Jeané Herman, a Licensed Insolvency Trustee and Vice President at MNP Ltd.

DIY solutions for your financial wellness!

By Jeané Herman, LIT, CIRP

If you live in British Columbia, we can see grey skies heading into 2020, as there’s a 50/50 chance you’re only $200 away from being insolvent, according to the latest MNP Consumer Debt Index conducted by Ipsos.

As scary as this sounds, you’re clearly not alone; in fact, half of the people around you are likely in the same boat. The good news is, like everything else in the 21st century, there’s a Do-It-Yourself solution! So, if you’re up for the challenge, roll up your sleeves and keep reading.

At MNP we have created DIY Debt Solutions: Your road to debt-free is just a couple clicks away!

  • Debt Calculator – by providing a little information about your province of residence, income, assets and debts you can create your plan of action for becoming debt-free.
  • Debt Scale – We all love quizzes, don’t we? The MNP Debt Scale will help measure your debt health and give you insight into where you can focus your efforts to reaching your financial goals.
  • MNP Budget Tracker Spreadsheet – Budgeting is the first step to improving and maintaining good financial health. Every financial plan starts with a budget. If you don’t already have a budgeting method that works for you, try our budget tracker spreadsheet. The key to every good budget starts with recording your income and expenses. This tool helps you record where you are now and plan for where you want to be.
  • Interactive Explainer Video – Sometimes even a combination of budgeting and debt repayment plans aren’t enough. If your financial future is looking bleak and you don’t see any way out, there are legal options for reducing your debt once and for all. Watch this video to learn about bankruptcy and consumer proposals.

A plan of action

Once you’ve completed your budget, it’s time to nail down a plan of action. There are many DIY debt-repayment plans, but the two most common and effective are the Snowball Method and the Avalanche Method.

Avalanche (pay off the highest interest rate first) * – Determine how much you can contribute toward debt repayment each month. Pay only the minimum payments on all the debts, except the debt with the highest interest rate (where you want to focus most of your debt repayment budget). Once you’ve paid it off, move onto the debt with the next highest interest rate, and so on.

*This is by far the most cost-effective approach over the lifetime of your debt.

Snowball (pay off the smallest debt first) ** — Determine how much you can contribute toward debt repayment each month. Pay only the minimum payment on all the debts, except the debt with the smallest balance (where you’ll focus most of your debt repayment budget). Once you’ve paid it off, move onto the debt with the next smallest balance, and so on.

**A study at Boston University found this method had the greatest success rate of the various debt repayment strategies. It may not make sense from a financial point of view, but the psychology of small wins helps build the momentum, motivation and consistency required to keep moving forward.

Know when to ask for help – not all problems are solely fixed by a DIY solution. Learn to recognize when you are ‘in too deep’ and need to get the help of a professional. If you’ve done the budget and tried the different self-directed repayment plans but you are still struggling to get ahead, it is probably time to call in the pros. Licensed insolvency Trustees can provide you with a free confidential consultation. Visit MNPdebt.ca to find the closest office to you!

Based out of Kelowna, Jeané Herman, is a Licensed Insolvency Trustee and Vice President at MNP Ltd. Contact Jeané toll-free at 310-DEBT or 877-898-2580 for a free, no obligation, confidential consultation to find a Life-Changing Debt Solution that fits your unique situation.

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