Debt 201: how to strengthen your financial situation
If you’re experiencing financial hardship or would like to improve your credit, these tips can help you take charge of your finances.
Carissa Lucreziano
Oct. 14, 2020
4-minute read
After reading our first article, Debt 101: understanding the basics, you may realize you have more debt than your income can accommodate. While this can be worrisome, it’s also reassuring to know this is actually the first step in your journey to managing your debt. We’re here to help you every step of the way and provide clarity and comfort in supporting the planning and organization of your finances.
If you’re experiencing financial hardship because of debt, you can use these tips to help you take charge of your financial situation.
There are 3 key areas to focus on when addressing financial hardship.
- Debt consolidation
- Credit planning
- Cash management
Let’s explore each of these in more detail.
Consolidating all of your debt into a single loan may help you pay off multiple debt obligations at one time. This can be beneficial, as it will provide the ease of one consolidated debt payment, and, in general, it may help lower your overall interest costs.
There are various ways to improve your credit situation. Your advisor can help you use a credit planning calculator to determine your overall debt load and the interest rates and costs associated with each. You can then compare the amount of interest that would be charged if all the loans were consolidated into a single loan. This comparison reveals opportunities for interest savings and debt management.
You can also assess the credit products you currently have and look for similar areas of opportunity.
Credit planning tips
- Check your credit score: Knowing where you currently stand is an important first step. Using the CIBC Mobile Banking® App, you can check your credit score for free.
- Discard unused credit cards: Close any credit or consumer cards you've held for a long period of time but are no longer using to avoid the temptation of filling those with additional debt.
- Pay the highest interest rate first: Focus on paying down your highest interest-rate debt or non-tax-deductible debt first.
- Keep your limit in check: Avoid maxing out your credit cards and keep your revolving credit balances below 75% of your limit. This will reduce how much debt you have and will help your credit score in terms of strength in repayment history.
- Get insured: Consider adding Creditor Insurance1 for CIBC Personal Loans, which can help to cover your payments in the event of a disability or involuntary job loss, or pay off or reduce your balance in the event of death.
Once you have assessed your current financial situation, you can begin creating a plan for going forward. A good plan should help you pay off your debts and start building your savings.
Cash management tips
- Create a budget: This is an important first step. It helps you better understand where your money is coming from and where it is going to. It can help you uncover what's essential and what isn’t, and help you free up extra cash. To get started, try our budget calculator. Or use our cash flow worksheet.
- Set-up a regular savings plan: Automate reoccurring transfers into your savings accounts, like for your TFSA, RRSP and RESP. Even small amounts saved regularly can add up over time: every little bit helps. With these savings out of sight and out of mind, they have the opportunity to be invested and grow rather than being spent in the spur of the moment.
The best time to start is now
By getting ahead of debt as early as possible, you can get back to achieving your goals.
Your CIBC advisor can work with you to assess your current situation, map out where you want to be in the future and create a holistic plan that meets your needs. Contact your advisor today or call 1-800-465-2422 Opens your phone app..
For more information, visit debt help.
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Book a chat with one of our advisors. They can help set you up for success, today and into the future.
