So you know you’ve accumulated some debt. And you’ve even heard that the debt level of Canadians is at the highest point it’s ever been. But, how do you relate the two? How do you know that you’re too far in debt, and that you need to start paying it down? Well, let’s take a look at some clues.
Your debt level is higher than the average Canadian’s
According to recent statistics, the average Canadian currently owes just over $26,000. If your debt is higher than this, you might want to start seriously thinking about paying it down. There are some exceptions however.
If you own a home and still have your mortgage to pay off; or if you’re in school and are currently still racking up that student loan debt, you might not need to worry about it for another year or two. Still, in either of these cases, you still need to be thinking about how you’re going to pay off your mortgage (and maybe even early,) and how you’re going to eventually pay off that student debt.
If however you have close to, or more than the $26,000 in debt, and it’s mostly consumer debt, you need to get an action plan and you need to one now. This is a dangerous number right now, especially if it’s tied up in high-interest credit.
This is really the biggest sign you’ve gotten too deep into debt; but there are a few more you can watch for.
You’re using payday loans
Payday loans may seem like a necessary thing; and sometimes they really are. But they’re also a risky hole that you can continue to sink into. When you use payday loans, you always have to use a portion of your next paycheque in order to pay off the loan. This of course, means you have less money, which may ultimately send you right back to get one of those payday loans. These loans are extremely high-interest, and extremely hard to get out of using once you’ve started. Don’t use them and if you already are, get together an action plan that will help you stop relying on them, and get a plan together to pay off your debt.
You’re relying on your HELOC way too much
You first took out a HELOC to help you with the down payment on that investment property. Then, it seemed like a good idea to also tap into it and increase the value of your home with an addition. And then the holidays cropped up so you used it to buy some last minute items, too. Rest assured, all of these individually might be good reasons to take out a home equity line of credit (although watch it when using it for that last reason.) But, you simply can’t use your HELOC for any and every expense that comes up, even if there is a positive flip-side to doing so. The bank can call that loan in at any time and when they do, you’d better be ready. Not tapping into it too much might help you prepare better.
These of course, are just a few signs that you’ve gone too far in debt. And you may have already seen a few more in your own life that have been their own warning signs. Remember that the goal is not just to lower your debt, it’s to be debt-free. And you’re only going to achieve that goal if you start paying it off. Because really, the only real sign you need that you’re in too much debt – is that you have debt to begin with.
