Attacking Christmas debt with a plan

There are different approaches to tackle paying off the money you owe

December was a hard time for families, financially. With Christmas, the increased cost of food and gas and everything else that comes along with the season, many families struggled to make ends meet.

Now that they are getting back into the groove of a new year, many families are looking for ways to save money and find ways to pay off these bills. Some families have to even make decisions about whether to pay for heat or food.

How can families do it all? Where do they start?

Brenda Wood has advice for families. She is a licensed insolvency trustee with Salyzyn & Associates Limited. Based in Bedford, Salyzyn & Associates are Nova Scotia insolvency trustees licensed by the federal government to administer government-regulated financial options to solve debt problems.

Wood’s advice for families is to start with a plan that includes a budget tailored to pay off debt. This involves several steps.

• Step 1: Determine how much you owe.

Gather all your statements for things like credit cards, loans or lines of credit. Make a list of the balances owing, the minimum payments and the interest rates for each account.

• Step 2: Create a budget plan.

Determine what your income is each month, as well as your household expenses. Don’t forget to include the minimum payments due on each of the debts that you listed. How much is left over for debt repayment?

Wood suggested visiting their website blogs (mydebtfix. ca) for more tips on dealing with debt problems and budgeting in today’s stressful financial environment.

•Step 3: Determine the method you want to use to deal with debt problems and repaying debt. The Pyramid Method and the Snowball Method are good places to start.

The Pyramid Method focuses on paying off the debt

with the highest interest rate first. List all your debts in order from the highest interest rate to the lowest interest rate. Focus on the interest rate alone. Always make at least the minimum payments on all debts. Use your debt repayment budget to make lump sum payments on the debt with the highest interest rate.

Once the first debt is paid in full, move on to the next debt in the list. Mathematically, this method will clear your debt the quickest.

The Snowball Method focuses on paying off the debt with the lowest balance owing first. List all your debts in order from the lowest balance owing to the highest balance owing. Always make sure to pay the minimum payments on all debts, reminded Wood.

Use your debt repayment budget to make lump sum payments on the debt with the lowest balance owing.

Once this debt is paid in full, move on to the next debt in the list. Psychologically, this method motivates you to keep going because you see progress quickly, she said.

Still having debt problems? Or having trouble paying all the household bills, plus minimum payments on debt? No money left over for debt repayments?

You are not alone, advised Wood. It is time for some expert help. You should seek help from a licensed insolvency trustee.

“We can help you find the right solution to put you on the road to becoming debtfree,” she said.