The fastest way to feel more secure about your financial situation is to reduce, or completely eliminate, your debt. But this isn’t what most Canadians do. In fact, consumer debt is on the rise, with debt-to-income levels at an all-time high. And if that isn’t frightening enough, two-thirds of Canadians 18–34 would find themselves in trouble if their paycheque was delayed by only one week, according to a September 2009 survey by the Canadian Payroll Association.1
If you have credit card debt, the first thing to do is get it under control. Once you have it under control, it’s time to look at ways to pay it down. There are some options available. Often it’s the interest rate credit cards charge, not the actual charges you put on the card, which will cause you to go into debt. If you are a good customer, with a good repayment record, you can call your credit card company and request a lower interest rate be applied to your balance. There are no guarantees that they will offer you a lower rate, but it never hurts to ask.
Did you know that some debt can be good debt? Good debt is debt that allows you to benefit from ownership or equity. For example, a mortgage would be good debt, as you have the chance to build up equity in the value of your property as home prices increase over the long term. If you have mortgage debt, it is always good to pay it down, but it does not necessarily have to be your first priority in decreasing your debt load.
As you acquire equity in your home, you may want to access that equity for a variety of reasons. If you access the equity in the form of “good debt,” that is for the purposes of increasing the value of your home through upgrades or an addition, then it may be a good idea. It is always smart to talk to a financial professional before tapping into the equity in your home to ensure that it is a good financial decision.
1 Source: http://canada.creditcards.com/credit-card-news/canada-credit-card-debit-card-stats-international.php.
Embrace the three P’s
Look at your situation today
Expect the unexpected
Insure your family’s future
Debt be gone
Pay yourself first
Creating a retirement strategy
When it comes to protecting their home, many Canadians aren’t aware that their lending institution’s mortgage insurance isn’t the only option. Term insurance offers a more versatile alternative to traditional mortgage insurance – often at a better price. With more protection, more flexibility and more value than traditional mortgage insurance, term insurance protects your family’s future as well as your home.
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