Sharing Wisdom

Everyone that knows me, probably knows about the debt that I managed to accumulate through student loans and consumer debt a few years ago, how I pulled myself further and further in, and only really got a hold of things when I was able to apply my profits from the sell of our house towards my loan from my parents and credit cards. Currently I still have a consolidation loan and line of credit that I am paying off, which takes approximately 40% of my monthly income. (Ugh, so much! Think of what I could be putting towards RRSPs and other fun things, but I'll be debt free in 2years).

Although I'm not the naive girl of 5 years ago that didn't know how to properly budget or the ramifications of building up consumer debt, I still find it useful to listen to and read articles by financial "experts". My favorite is Gail Vaz-Oxlade, host of 'Til Debt Do Us Part on Slice, who writes a daily blog that I follow through my Google reader.

I wanted to share today's post as I think that it outlines some very practical ways to reduce/pay off your debt.

Digging Out from Under
By Gail Vaz-Oxlade

Okay, you messed up. Big-time. You owe a ton of money. You’re working, but not making enough to deal with your life and your debt. What’s a body to do? Here are some things to think about.

Sell your stuff. It doesn’t matter how much you paid for it, or how little you can sell it for, if you have stuff that can bring in a buck or two, sell it. Old textbooks can be sold at Amazon. Craigslist and eBay are other great sources for hawking your stuff. From fitness equipment that’s now just a hanger for dirty clothes, to old furniture, electronics and toys, you probably have a few hundred dollars sitting around taking up space. Convert it to cash and pay down your debt.

Get a second job, a third job, a better job. You’ve heard me say this before. I don’t care how hard you have to work. If you’re in the hole you need to find the will to work harder. There are 168 hours in a week. Assuming you keep half for yourself, you can still work 84 hours a week until the debt is gone.

Sounds harsh? Grow up! When young doctors are interning, an 80-hour week is a slow one. When investment bankers are earning their stripes, 80 hours are a walk in the park. Ditto lawyers who want to make it to partner, and farmers who want to make a profit.
Wait tables, work retail, stuff envelopes. If you need to be home with the kids, find work that will let you earn an extra paycheque right from home. They’re out there.

Start your own business. Do you have a skill that someone else is willing to pay for. Play the guitar or piano? You can teach music. Love to sew? Start an alternations or custom sewing biz. A great academic? Tutor kids. Speak a second language? Teach conversational Spanish, Chinese or Russian. Or start a translating business. Are you a fabulous touch-typer? Start your own transcription business. Great eye for web design… well you get my drift. Loads of people start a side business only to find that as they follow their passion, more and more of their money comes from doing something they love. From house painting to gardening, people find joy in doing things they love while they make extra moolah.

Rethink your housing. If doesn’t matter if you live in an apartment or a house, rent or own, taking in a tenant or getting a roommate are terrific ways to lower your housing costs so you can plough more money into debt repayment. Exchange students from other countries, kids who are in college or university, friends who are in a similar debt dilemma are all looking for a place to live and your place may be just the ticket. So it’ll be a little cramped for a while. So it’s a pain having a “stranger” in your home. Ya know what, you should have thought about the mess you were making when you went out and charged up a storm. Now your priority has to be to get it paid off. And this is one way to make an extra $400 - $700 a month.

Dead set against living with strangers? Then find a cheaper place to live. Or find a friend or family member you can cotch with while you pay down your debt. How about managing an apartment building for a free apartment? As long as you’re available the required number of daylight hours to deal with building maintenance, this could work for you.

Cash in non-retirement savings to pay off your debt. If you have money in an GIC that is paying you 4% and you have a credit card that’s charging you 18%, cashing in the investment to reduce or pay off the debt will save you gobs of interest. This does not apply to registered assets that would trigger a tax bill. Leave your RRSPs alone.

Adjust your withholding tax. If you usually get a tax refund, you’re paying too much in tax. Fill out Form T1213 (in Canada) or a new W-4 (in the U.S.) and get your tax reduced at source so you have more money to put toward debt repayment each month.

Grab your cash value. If you have a life insurance policy that has some cash value built up, you can borrow that cash value and use it to pay down your high-cost debt. You may have to pay some interest on the loan, but it won’t be a patch on what you’re paying on that department store credit card. Once the debt is gone, pay back the loan from your insurance policy asap because the amount borrowed will reduce your beneficiary’s payout.

Sell your car and take transit, or buy a cheaper car. I meet people who are obsessed with the cars they drive. They have to looook gooood in their cars, so they lay our hundreds of dollars a month for payments, pump premium fuel and pay whopping insurance so that the people they drive by on the road – strangers – will be impressed. Friends and fam won’t be so impressed because they probably know just how deep your hole is, and they’re scratching their heads and wondering what possessed you to go out and get that stupid car. Lose the luxury. Get a putt-putt and get debt free.