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Friday, April 19, 2024

Guest Post: Reducing Debt Load

How do you know if you have too much debt? Learning about debt can help you determine if you have more than you should. The first step is to learn about and understand debt and just how it works. In this age of buy now pay later, the traps of debt are numerous.

There may be warning signs that you are incurring too much debt or are close to being in financial trouble. These warning signs may include:

  • Inability to make all of your monthly payments. If you are noticing that every month you are having troubles making all of your payments or are skipping one or more of them you have a serious debt concern and it’s time to take drastic action.
  • Using credit cards each month immediately following making a payment. If you find that you are using a credit card as soon as you make a payment on it, this is a warning sign that you are living above your means.
  • Add up all of your debt and determine what portion of your income is going towards it. When you are spending more than 10% of your income on credit card and instalment loans this is a warning sign you could be facing financial hardship.

To calculate your total debt and understand just what your financial situation is, add up all of your monthly payment and divide this by your monthly income. Then take that number and time by 100. For instance, if you have credit card payments that equal $200, auto loans that equal $300, and student loans that equal $100 your total monthly debt is $600. If your total income each month is $2500 you would then divide $600 by $2500. This gives you a result of 0.24 then times by 100 equals 24%. This means that every month almost one fourth of your income is going just towards meeting the minimum payments on your loans.

If your total debt to income is at a ratio of over 40% you could be facing serious financial difficulty. In this situation, it’s important to take drastic action to work on reducing your debt. You may want to consider working with a professional with expertise in this area such as consolidatedcredit.ca‘s debt management plan. Working with a financial advisor you can determine which debt reduction plan will work best for you. These options include considering a debt consolidation loan, creating a repayment plan, using a snowball effect, or even working with creditors to reduce payments and fees.

The important thing to remember when working to reduce your debt load is that you cannot accrue any more debt. You must first work on creating a realistic monthly budget that you can live by while using any additional funds towards reducing and finally eliminating unnecessary debt.

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Mark Hanlon


Mark is an avid photographer, Starbucks addict, motivated cyclist, struggling runner, and rocking single parent living outside of Toronto, Ontario. Living with two chronic ilnesses, Crohn’s Disease and Diabetes, life for this Transportation Planner and Registered Professional Planner (RPP) can be an interesting mix.