24 Sep

Bad Habits to Avoid When it Comes to Debt

General

Posted by: Robert McCaw

It’s important to understand when debt is taking over your finances. You may think money issues arise suddenly but in reality they have been slowing building for months or sometimes years.

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What seems as nothing today can grow into a great deal of debt that puts a burden on future spending and your credit. Use the list below to help prevent you from having money problems.

5 things to avoid when using debt; 

1. Being a credit card addict

If one credit card is maxed out it’s only logical to get a new one right? Wrong. This is one of the worst habits to get into and far too easy as credit card companies practically throw pre-approved cards at you. Pay off your current debt before looking around for more.  If you’re unable to pay off the card you have is getting another credit card the best idea? 

2. Only paying the minimum amount

No one wants to pay more than they have to on their credit card bills but interest adds up, and that minimum payment only goes so far. Check the back of your credit card bill to see how long it will take you to pay off that card if you only pay the minimum. 

Did it scare you!  Increase monthly payments to shrink your balance, it will ultimately save you from paying more on interest.  Using the Snowball method of paying off debts is one of the fastest methods of becoming debt free.  This means paying the credit card with the highest interest first while making the minimum payments on all the rest. 

Take all the extra money you were putting on the other debts and put it on the one with the highest interest, once its paid off take that and add it to the minimum payment of the next highest credit card and continue doing this until all your credit cards are gone.  You will be surprised how fast you can be debt free.

3. Not having money management skills

Poor budgeting is a common bad habit when it comes to incurring debt. This is something that is not taught in school but should be.  Check out Dominion Lending’s EnRICHed Academy’s “Smart Start for Financial Genius” program is a five-DVD set and workbook, designed to educate young adults and their families on the fundamentals that build wealth.  

Most people don’t understand the implications of taking on too much debt which affects your credit.  This could stop you from purchasing a home or cause you to pay higher interest on anything you would like to purchase. 

Do you know how much money you spend in an average month? You should. If you’re on the road to debt recovery or want to save money each month, track your spending for three months and cut costs where ever possible.

4. Spending more than you make

Look at the amount of money you spend on a monthly basis versus how much you are bringing in after taxes. If you notice after paying for bills, food, car, gas, mortgage, and insurance, that you don’t have much in terms of savings, you are heading towards trouble. 

Most people don’t feel there is any place they can cut expenses but once you start tracking it you will be surprised.  Take you example coffee; how many times a day do you spend $1.60 on your favourite cup of coffee?  If you just cut out one a day that’s almost $50.  What about lunch?  If you brown bagged it to work, rather than spending $9 on a value meal that’s another $180 a month. 

5. Dipping into your RRSP

Do you want to work past 65?  You won’t be very happy with yourself if you have to cash in your investments early. You will be penalized with higher taxes as the extra income will be taxed at your current income level. 

So you could lose as much as 40% off the top to taxes and force you to work longer than you wanted.  Is whatever you wanted really worth that?

Get out of debt

The best advice out there is to not get caught up in owing more than you can pay. However, when that is the case there are things people can take in order to decrease the amount of money owed using debt consolidation. 

As mortgage rates are at an all time low right now it sometimes makes sense to use the equity in your home to pay off those high interest credit cards with a new mortgage at approximately one fifth of the interest.

Give me a call or email for a free debt consultation and get started in a new and debt free direction.

mccawmortgageteam@gmail.com      613 354-9037           1 877 333-4983 x760

 

 

 

5 Sep

Adding Outside Debt to Your Mortgage For Line of Credit Rescue

General

Posted by: Robert McCaw

The Over Spending Complex

You really needed (or wanted) that flat screen, plus the surround sound to top it off. Or maybe you spent more than expected on vacations this summer. It’s always nice to enjoy the fruits of your earnings and at times is far too easy, I mean it’s your money right? However, after all is said and done, your credit limits may be bursting at the seams.

Don’t get into a situation where it takes years to pay off your credit just because you were trying to live a little.

The Debt Solution         

If what you’ve read so far sounds familiar, there is a way to overturn your debt with a remortgage if your home has equity in it. Adding outside debts (i.e. credit card bills, renovation bills) to your mortgage can save you money if you’re currently paying more than $300 a month.

It’s important to understand if this mortgage tactic fits your needs. If you aren’t receiving a lump sum of money in the near future than combing your debts into your mortgage might be just what the doctor ordered.

 

Other factors you should consider

  • How much equity does your home currently hold?
  • How much is your monthly mortgage payments now?
  • Extra debt on your mortgage translates into increasing your total home loan amount

 

Debt Consolidating: Do the Math

Let’s say your debt was pushing $10 000, when you refinance your mortgage it will save you on monthly payments in the event your house has that equity I was talking about. This is meant to make your life easier and leave some extra dollars in your pocket.

Consolidating your debt could be the perfect card to play, as interest rates on mortgages are commonly lower than other debts you might incur.

 

Let’s talk about whether debt consolidating fits your financial situation, give me a call 1877 333-4983 X760