Will 2018 be your debt-free year?

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Sabrina Almeida

If you haven’t made a New Year’s resolution yet, here’s a practical one—a plan to become debt free! (A Utopian dream for most of us.) While it may sound like those ads you have seen on television or heard on the car radio, I am not suggesting you consult a debt specialist to reduce or eliminate your loans. Just doing a reality check and plugging the drain, perhaps!

Mortgage and car payments, household bills, children’s education—the list of needs is never ending. With rising prices and salaries that don’t keep up, fulfilling “wants” is typically out of the question for most middle-class families. But we’ve found an unhealthy and dangerous way around it.

Years ago, some friends shared that they wanted to be debt-free by the time they turned 40. It seemed within reach at that time. A decade later, few have achieved their goals. Disheartened many have decided to live it up anyway. And home equity has become the new credit card to fund their dream lifestyle.

While stagnating income might be blamed for not being able to break the shackles of debt, a closer look might reveal poor financial management and a growing appetite for risk to be the major causes.

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From investing in real estate to purchasing luxury cars and jet setting around the world—many first-generation immigrants are spreading their finances really thin. Now with the measures taken by the Ontario government to stabilize the real estate market as well as the rising interest rates, panic has begun to set in.

With record debt levels, many Canadians are on the brink of a personal financial crisis. And South Asians, normally considered to be financially shrewd, have not come away unscathed. A fiercely-competitive lot, we took outdoing the Kapoors, Chawlas and Jones to an all-new level.

As mortgages come up for renewal, several are worried about what the increased payments (of even a few hundreds) could do to their already-strained budgets. Those who banked on real estate investments are even more nervous as it is highly unlikely that they will be able to cash in soon. As some reports previously warned 2018 could be a scary year for people in this situation!
But it could also be the year of personal reckoning! After all, just because you can borrow money, it doesn’t mean that you should.

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It is time to take ownership of our debts. The numbers might shock us into action.

We are told that the ideal way to make ends meet is to spend less than one earns. For most that would mean living on frugalities. What’s wrong with that? Nothing, if social image is not important to you.

Growing up in a cash-based economy that India was in the 80s, one couldn’t spend what one didn’t have. Turning the clock back might be the financial lifeline many of us have been looking for. Meaning using cash and not credit cards. Stopping borrowing is the first step towards reducing debt. Continuing along the same path will only help dig a bigger hole for one’s self.

Let’s make a budget and stick to it! How much ‘fun’ money one is allowed depends on your financial situation. Tracking one’s expenditure weekly or monthly is a great way to identify the pitfalls and stay on task. Equally important is to set savings and debt repayment goals. After all, the point of this exercise is to pay down your debt.

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Since circumstances and needs change it is important to frequently revisit your plans. Having an emergency fund can help minimize the effects of any set back.

A new home and car, designer wardrobe, luxury vacations are all nice to have… but only if we can afford them.

Thinking we can have them now and “afford the payments” is what results in the vicious cycle of debt.

How much debt is too much? Experts say that if more than half of your income goes in loan payments, you are in over your head. Let’s not fool ourselves into thinking the situation is under control. While you may consult a professional for assistance, remember they can’t change our spending habits!

It’s time to live a debt-free life !

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