Did you know not all debt is bad? The good kind helps generate income and increases your net worth. It also helps you build a credit history.

But of course there’s also bad debt, which could mean you’re spending money you don’t have on depreciating assets such as a car, ski gear, an expensive bike or designer clothing. Or, perhaps you’re more drawn to experiences such as dining out, weekend getaways or vacations. While these purchases might be good for your spirit they provide no long-term financial value. More often than not they are short-term pleasures.

How can you tell if you have bad debt? Here are some signs:

• Paying bills late
• Bouncing cheques
• Paying only the minimum due on a credit card bill
• Using an advance from a credit card to pay a bill
• Asking friends/family for a loan
• Using payday loans
• Cutting back on necessities such as food
• Taking on a second job to pay bills

Tips to reduce your debt

• Make a budget and stick to it
• Find lower-cost pleasures to enjoy such as packing a picnic instead of going out for dinner
• Get budget counselling or a ‘budget buddy’
• Talk with your creditors and consider combining debt/loans to make one monthly payment
• Ask your financial advisor if making lower monthly payments is the right option for you or check out if you can get a lower interest rate
• Collect debts owed to you such as loans you gave to family, friends or co-workers
• Check to make sure you don’t have any unclaimed reimbursements from health plans, employers, taxes, child support/spousal support
• Sell a possession to pay down what you owe

Living life without bad debt sometimes requires difficult choices. But remember the benefits. Reducing your debt load will help you gain control of your financial life so that you can reach your long-term goals. Connect with us today to explore tailored solutions that meet your unique financial needs.

This blog post provides general information only, and does not constitute financial, accounting, tax, legal or other professional advice. We encourage you to obtain personalized advice from qualified professionals regarding your particular circumstances. Please see our Terms of Use.