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Feel like you’re missing out whenever you hear about “pandemic savings?” The changes COVID-19 brought to Canadian life have meant very different things for different people. For some households, savings increased dramatically as they cut out costs like commuting, daycare, and entertainment.
For others, the pandemic meant long (and in many cases, ongoing) periods of unemployment or underemployment. Bridging that gap often means leaning on credit cards, drawing on lines of credit, falling behind on bills, or even missing rent payments.
If you’ve found yourself deeper in debt due to the pandemic, you need a plan for getting out of it. These five tips can help when you’re dealing with credit card debt or other obligations.
Credit counselling is a way of taking high-interest debt and reducing the cost of carrying it, as well as giving you a clear timeline for getting out. Start by talking to a certified Credit Counsellor with a non-profit credit counselling agency like Credit Canada Debt Solutions.
They will review your finances and help you come up with a plan for repaying your debt. They can talk to your creditors about reducing or stopping interest charges to help you get out of debt faster.
Your industry was shut down for months, but as you get back to work, getting out of debt will likely be a high priority. Even as you make progress paying it down, if you can, try building a minor emergency fund. Even having just $1,000 set aside can help you avoid going back into debt should a surprise expense come up. It will also help with financial anxiety.
The recovery for certain industries is going to be a long one. Tourism and travel will take a long time to recover, as will industries like live entertainment and the restaurant industry. Even as things open up, many businesses have already shut down.
Changing careers could be the best way out of long-term debt. In some cases, it might mean taking on student loans. That can feel counterproductive, but if you can’t wait for your industry to recover, it may be the best option.
What are you supposed to do if you’re juggling multiple types of debt? Many Canadians who were out of work due to lockdowns fell behind on rent. In fact, an incredible 250,000 households were in arrears as of March 2021, and many risk eviction or face tough payment plans.
Prioritize payments that help you stay in your home. There are other ways to deal with credit cards, such as credit counselling. Don’t risk losing your home to make the credit card company happy.
There are ways to transfer debt from one account to another to reduce the interest rate. For example, if you have access to a line of credit, transferring credit card balances to your line of credit can reduce your interest rate considerably.
Dealing with debt is a necessary first step toward turning your finances around.
