Three easy steps to help your income rebound as the economy recovers

BY CLEVE DeSOUZA

The Canadian housing market is rising, an early indicator that the economy is recovering from COVID-19.

Early in 2020, when COVID-19 forced businesses and schools to close, the housing market stalled. That seems to be changing. Equifax Canada’s most recent report on consumer credit shows Canadians are carrying about 2.8% more debt now than the same quarter in 2019. Mortgages are responsible for much of that increase.

It’s not all-good news, though. The same report indicates that 3 million of us have deferred a payment at least once since February. That indicates we’re still feeling the financial pressure. On average, we’re each carrying $73,532 in debt right now.

If you’re feeling overwhelmed by debt, there are three things you can do today that will help:

Create a realistic spending plan
No one likes the word budget, so let’s call it a spending plan. Plan to spend about 50% of your after-tax income for things you need, such as: housing, groceries, and medicine. Dedicate another 40% to the things you want, such as eating out or streaming services. Put the remaining 20% into savings. No matter how little money you think you have, it’s important to save some from each paycheck.

Stop using credit cards
I know this isn’t easy, but if you don’t go in deeper, you can climb out faster. The spending plan you created should help with this. You can try putting the cards into a bowl of water and sticking it in the freezer. That way, you still have the card if there’s an emergency, but it’s difficult to make impulse purchases.

Call your creditors and ask for lower interest rates
There’s a customer service number on your billing statement. Remember that your creditors need to stay competitive. Do a little research and find out what rates other credits offer. Then, call your creditors and ask them to match the rates. If you get a no, don’t give up. Offer to make a substantial payment in exchange for the lower rate. If you still get a no, ask what you can do to qualify for a lower interest rate in the near future.

Those three steps offer immediate relief, but if you take three more steps, you could realize long-term relief from crushing debt.

Pay off one debt
It might seem like a good idea to pay off the debt with the lowest balance, but all debt is not equal. Say you owe $5,000 on a Visa card with a 12% interest rate. If you make the minimum payment of $150, it will take 154 months to pay it off. Your interest adds up to $2,361. But if you increase your monthly payments to $350, you’ll pay it off in 66 months with only $813 in interest. That’s a savings of $1,548, making it well worth taking the extra time to pay off the debt charging the highest interest.

Ask for a raise
Only about 30% of us ever ask for a pay hike, according to a study by PayScale.com. But the reward for taking the risk is substantial. The same study shows asking for a raise pays off about 80% of the time.

Look for a new job
If you can’t earn more money in your current job, then maybe it’s time to change jobs. Find out what others in your industry earn. Raising your salary may require nothing more than changing employers. If you don’t like your current industry, then consider getting the training or schooling to work at a higher-paying job. A quick Google search can point you to in-demand fields.

Whatever you do now, remember that the work doesn’t stop when you get through the immediate crisis. It’s easy for expenses to creep back up, especially if you negotiate a pay raise. Don’t let that happen to you. Meet with a financial representative now to set goals for the future and create a solid plan to build personal wealth.