Obsessing about your debts won’t get rid of them, but here’s what will

Sandra Fry: It’s crucial to act rather than live with regret

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Do you think about your debts and money all the time? If you struggle with that obsession, whether at work, play or when trying to sleep, that’s a warning sign you need to do something about them.

Worrying about what you owe is about more than the dollars and cents you see on your statements. It’s a sign you need a better overall money management strategy. However, when money is tight and you’re living paycheque to paycheque, seeing the big picture can be hard. To help get you to that point, here are some things I tell my clients that you might find helpful, too.

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A lot of clients think that because they’re in debt, they’re bad with their money. Resist that kind of thinking because it’s not always true and negative thoughts can make it hard to move forward. Debt is part of our lives and there is good debt and bad debt.

Borrowing to further ourselves or build wealth — for example, a student loan or mortgage — is typically favourable. But good debt can turn bad when we borrow too much relative to our situation and the debt no longer enhances our life in a significant way.

Bad debt is typically defined as money we borrow for depreciating assets such as car loans and credit-card purchases that don’t get paid off. We need a vehicle to get around, but committing to high lease or loan payments isn’t favourable. With some advance planning, you can save money towards a good used car so that you may only require a small loan.

Lifestyle expenses and consumables, such as clothes, food, coffee/drinks or furniture, while necessary, become bad debt when paid for with high-interest credit cards if you don’t pay them off monthly.

But even if you have a lot of bad debt, it’s important not to consider yourself as “bad” or “bad with money.” No one is born knowing how to be good with money, so while you might have made some bad or unwise choices with your money, don’t throw the baby out with the bathwater.

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Every choice is a new opportunity and a fresh chance to make a good decision. There’s plenty of opportunity to redeem yourself and rebuild your credit rating if it has taken a dive.

A lot of stress will grind you down and be demotivating, but a little stress can motivate you. To spur yourself into action to get control of your situation, avoid putting yourself down and start a more positive self-dialogue.

For example, as long as you aren’t frivolously overspending, change a thought such as “I shouldn’t spend money on …” to “I could buy it if I don’t spend money right now.” By focusing on what you can do, rather than on what’s not possible or not wise right now, you’ll feel better about what you can do and you’ll regain control.

To figure out if you’re spending too much or being unnecessarily hard on yourself, calculate how much you’re spending in relation to your income. Outline a budget based on your current spending, then add in your monthly debt payments. If that tips the scale and shows you’re in the red each month, start considering your options. Spending less is great; earning more wherever possible is great, too. Most people need to do both in order to get their budget balanced.

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Some choices will be harder to make than others, but keep in mind that when your financial situation improves and the cost of living and inflation stabilize, you can reconsider your choices. For now, though, it’s time to do a deep dive into your spending if debt is taking over your thoughts and preventing you from working towards other goals and savings.

For a few weeks, keep careful track of everything you spend. Use paper and pencil, an app or a spreadsheet, but figure out where your money is going. Once you know that, you can determine what you need to do differently. Doing what you can will help you feel more in control and ease your stress, rather than consume you with anxiety about what the future may hold.

If this all sounds a bit like budgeting, don’t knock it before you try it. Start by checking to see where you stand now versus a year ago. If your debt level is the same or higher than it was then, plan a fun but frugal holiday season so that you don’t start the new year off deeper in debt.

If you owe more than you did this time last year, unless it’s due to a single large expense such as a trip home for a close relative’s funeral or braces for your kid, the higher cost of living combined with steady spending will continue to cause you stress and anxiety.

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We all know that worrying about bills won’t make them disappear, so reach out to a non-profit credit counsellor in your area if you need help. It’s crucial to act rather than live with regret.

November is Financial Literacy Month, so it’s the perfect time to find the tips and resources you need to get yourself on track so that the upcoming holiday season can be one of peace rather than financial frustration.

Sandra Fry is a Winnipeg-based credit counsellor at Credit Counselling Society, a non-profit organization that has helped Canadians manage debt for more than 27 years.

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