Take a Load Off: 5 Steps to Reducing Stress by Decluttering Debt :: Emotional and Mental Health

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Take a Load Off: 5 Steps to Reducing Stress by Decluttering Debt
by author Rebecca Sudano

Clutter got you down? Well perk up! The New Year is the ideal time to clean out the previous year's accumulation of junk, dust, and debt. Holiday credit card bills, home renovation payments, start-of-the-year bills-these are the stuff that can make you toss and turn at night.

If you feel like you're living in a money mess, here are 5 steps to declutter debt.

1. Make a declutter list
Begin by listing the parties you owe money to, how much, and at what interest rate. Prioritize each debt obligation according to the highest rate. Chances are credit cards may be at the top of your list.

2. Clean up credit card debt
Contact each card company and request a reduction in your interest rate. If you have several cards, ask the companies with the lowest rates if they will offer you a better rate to consolidate other balances on their card. Or ask your bank what rate it will offer you for a consolidation loan. If it's lower than your credit cards, you could pay off all your cards with a bank loan and have only one monthly payment at a lower interest rate.

3. Organize other debts
Now look at the other debts on your list and consider ways to reduce these. For example, can you refinance your mortgage, or pay down a student, car, or home improvement loan? If you don't have sufficient funds to tackle these debts, carefully track your spending to see where you can find some cash.

4. Tidy spending
Save the receipts for everything you and your family members buy that comes out of the household budget. Each day, record these amounts in categories: lunch, babysitting, transportation, etc. Add these up at month's end to investigate where your money is going. Most people are surprised to find how much they spend in certain areas: "Wow, $60 a month for coffee!" Decide where you can reduce spending and set up a "debt-reduction account" into which you deposit the money you've saved each month.

5. Junk hefty monthly expenses
Now that you're on a roll, list all of your other major monthly expenses: phones, Internet, cable, utilities, and so on. Consider which ones could be reduced or eliminated. If you need help with decluttering or can't seem to prevent debt from accumulating, consult a professional who can advise you about other ways to rid your home of debt.

Remember: small savings can accumulate quickly. By decluttering a bit here and a bit there, you could have a tidy financial house-and much less stress-by summer.

Rebecca Sudano (rsudano@bdo.ca) is a trustee with BDO Dunwoody Limited (bdodebthelp.ca).

Source: alive #January 09 Newsletter

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