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How to destroy your debt

September 9, 2020 • Education

How to destroy your debt

Many of us understand what it’s like to deal with debt that feels like it’s spiraling out of control.  During times of economic uncertainty, many of us are spending sleepless nights worrying about how make ends meet and get a handle on our debt. The good news is that there is hope and the Canopy team is ready to provide the tools and advice you need to destroy your debt – once and for all.

While destroying your debt isn’t like lighting the fuse and letting it explode (though that would be one epic way to destroy your debt!), we’re going to try to break it down for you in this video in a few key steps.

First things first, get an idea of what your credit report looks like. Apps like Credit Sesame and Credit Karma can be great ways to monitor a rough estimate of your credit score. You can get your FREE credit report once a year at www.annualcreditreport.com. Your credit report can be confusing and intimidating, so if you need help interpreting it, please give us a call and we can help you!

Your next step is to write down your monthly expenses. Write down your fixed expenses like your rent or mortgage, utilities, phone bill, subscriptions, and loan payments. Then go through all of your account statements from the past month and look at your account history. Write down all of the things you spent money on and try to categorize them a bit – for example you spent x amount of money on video games, dining out, clothing & accessories, etc.

Are there things you are paying for every month and not using? Are there some things you can live without? A little bit of thinking and awareness goes a long way. Get this – a $5 weekly expense like coffee adds up to $260 per year, and I bet you’re getting more than one coffee per week. But here’s the thing, if you love stopping to get a coffee, maybe there’s something else you can cut from your expenses instead? Once you free up more money, you can apply it directly to paying off your loans.

More than likely you’ll be pretty shocked at how much you spent on things you really didn’t need. We’ve done this too and felt the same way!

Alright so now let’s focus on a more positive note – your income! Write out your total net income for the past month and make sure to include your day-job and side hustles.

If you don’t like the ratio between money spent and money earned, that’s why we’re here and in this together. Let’s turn things around to tackle that debt!

So now that you have an accurate idea of what your expenses vs. income looks like, you can create a budget (there’s that important word we all love to hear!) that will help you focus more of your income on paying off your debt.

  1. Make a list of your current debt like your mortgage, car, credit cards, personal loans, etc. (I know it’s another list, but it’s an essential step in destroying your debt!) Decide which loan you want to focus on paying off first. We recommend starting with your smallest loan balance like a credit card or personal loan. Once you pay off the smallest one, move to the next smallest one, and so forth.
  2. Find out what interest rate you’re paying on ALL of your loans. You can find this information by contacting the lender your loan is from or looking at the statements. Maybe it’s time to refinance and potentially get a lower rate? You can get out of debt quicker when you decrease how much you’re paying in interest every month.
  3. Can you consolidate your credit card debt? Often times you can apply for a personal loan that will allow you to keep all of your payments in one place and tackle your debt quicker.
  4. Set up automatic payments! In general paydays are most often the same days/dates of the month, so schedule automatic payments on your loans EVERY. SINGLE. PAYDAY. So the money is out of sight, out of mind.
  5. Are there ways to increase your income? Side hustles are a great way to add income to help make those loan payments. Check out one of our 2020 videos about how to start & grow your side hustle on our educational videos page. 

You work hard to earn your money and it’s equally important to make sure you get the most value from it, too.  And remember, you don’t have to destroy your debt alone! We’ll be here every step of the way. You can make an appointment and meet with one of our expert Member Advocates whenever you're ready.

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