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Today we’re beginning the series on Step 3 of Building Successful Finances: Preparing for what you want.

Here you can read up on Step 1 and Step 2.

Preparing for what you want, includes 3 things:
1) Dealing with your Debt,
2) Saving 
3) Investing...
... and they should be done in that order with the financial margin (monthly savings) you’re building.


To build strong finances, it is important to have as much control of your money, as much access to it, and as much financial security as possible.

Your debt makes you a slave to the bank, giving them control of you and your finances, and you waste away your money in interest costs that you could be using to save. For these reasons it is best to rid yourself of your high interest debt – credit cards and high interest loans – before you begin actively saving. Once your high interest debts are paid, it’s wise to designate some of your margin toward savings, as well as your lower interest debts.

Putting money towards your debt is not as exciting as saving for big goals but ridding yourself of that debt will help you accomplish your exciting goals and save for the future more easily and more quickly down the road.

So, how do you deal with debt effectively?

  • Unify Your Debts at Lowest Possible Interest Rate.

If you have multiple debts at varying interest rates, the simplest and most financially effective way to pay them off is to merge them into the lowest interest rate possible.

Example: You have $10,000 owing at 10% on a line of credit with a limit of $20,000. You have another $7000 owing on a credit card at 22%. Use the remaining room on your line of credit to pay off your credit. You still owe $17,000 but with only a 10% interest rate. 

What if you can not merge your debts?

  • Focus on one debt and only pay interest on the others.

Start by focusing on your lowest owing loan, or the debt with the highest interest rate. If you have no credit cards (which should be your first priority), it doesn’t really matter which one you start with, so:
1) Choose a debt
2) Pay as much into it as you can
3) Only pay the interest on your other debts
4) Repeat until all debts are gone.

Your ability to save for your goals and your future gets easier and easier as your debt load goes down.

Now that we’ve got debt addressed, over the next few weeks we’ll discuss saving and investing, tools you can use for both, and when to use a TFSA or RRSP.

All the best paying off your debt!

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