There are a lot of articles on here that go over fancy ways to manage debt or invest, or merely get on top of your finances. Today I’m going to go over the easiest, simplest, laziest way to get out of debt. And fast.
Pick an app
Yep, no beating around the bush here. If you’re a Canadian who just cannot get out from under your debt, then honestly choosing a top application is an excellent option these days. There are so many to choose from, but they all amount to the same thing.
What these applications can do is track your spending, and make sure you’re aligning with your short- and long-term goals. While the process might take a little time to set up, mainly from collecting all the information, it can save you thousands when you get down to it.
What Canadians will need to put in first is all your income sources, which would include benefits, your pay, and any other income that comes your way. You’ll then need to put in what comes out on a regular basis, which would include your taxes, mortgage payments, and other bills.
Next, you’ll need to go over the last three months to get the average you spend on other items. This includes food, gas, clothing, and anything else. From there, your application really gets to work.
Making a budget for you
The app you choose will then create a budget for you. But here’s the catch, you need to follow that budget! Fortunately, there are many applications that make this very easy. In fact, you can even find apps like this through your banking institution, or apps that work with your bank. That way, every time you spend something, it takes it off your allocated budget for the month.
Now that this is set up, part of your budget will also include automated contributions towards your debt. There are many ways to pay this off, but I would go with the debt that holds the highest interest. Pay that off first with your contributions, and any other cash that comes your way! Whether it’s a bonus or a gift from grandma, put it towards your debt.
As for which one to pick, some of the top debt-management apps include Mint, Mylo, Debt Payoff Planner, and more. And again, you can usually find them through your bank as well.
What to do when you are debt-free
If you actually stick to your budget, then you should pay off your debt in most cases in around a year! While that wouldn’t include a mortgage, most Canadians can pay off student loan or credit card debt within that timeframe. Yet, this does not mean you should stop putting cash aside.
First, keep putting that cash aside in a Tax-Free Savings Account (TFSA) to create an emergency fund. This should create around three to six months of your salary ideally. You can invest in this as well, adding dividends through a safe investment such as Royal Bank of Canada (TSX:RY).
RBC stock is a great choice as the country’s largest bank, with dividends at 4.23% as of writing. It’s also only down 2% in the last year, providing a safe investment even in this economic downturn. So you can then store your cash for emergencies, to use if you ever get into debt over your head again!
