2 methods to DITCH THE DEBT quickly!


– Hi, my name is Cindy
Marques and you’re watching Dressed to Invest. Today, we’re talking about the big D. And it’s exactly what
you’re thinking: Debt. (upbeat jazzy music) According to a Global
News report for 2018, Canadians are using 15% of
their income for debt payments. And of that, seven percent
is just for interest charges So, that means, on average,
only half of our efforts are actually put towards
reducing the debt load. And for Canadians aged
26 to 35, Equifax reports that as of 2019, the
average debt load we carry is over $18,000. That number clearly excludes mortgages because if you’re a
millennial living in Toronto, the average new mortgage for 2019 tacks on an additional $400,000. Welcome to adulthood. So, how do we dig
ourselves out of this mess? First of all, take a deep breath. Take a moment to internalize the fact that you’re not alone in
this and, unfortunately, your debt problems just
aren’t that unique. So let’s ditch the stigma
and shame right now, so that we can move forward. The slow climb out of
deep debt is going to be really freaking hard and it
requires you to suck it up, dish up some discipline,
and face the facts. You need to do some work and, as always, it starts with tracking your spending and knowing your numbers. It’s the only way to make
sense of the problem. Are you racking up debt because you simply don’t earn enough? Or is it because your lifestyle
is bigger than your wallet? Time to get real. You either need to spruce up your resume or nix the #Yolo spending. Probably both. It’s time to put on your big
girl pants and take action. So, let’s talk about
how to make that happen. Method number one: Debt Avalanche. This is my preferred
method and, technically, the mathematically correct choice. Essentially, it involves
targeting your largest payments towards your most expensive debts first. And my expensive, I don’t
mean the largest balance, I mean the highest interest rate. So here’s how it works. Create a list of your
debts and arrange them from largest interest
rate to the smallest. And for each debt, make sure to include the annual interest rate,
the balance outstanding, and the minimum monthly payment due. Next, you need to figure out
how much of your monthly income is available for debt repayment. Yeah, it’s only possible
if you’re diligent about tracking your cashflow. So if you really mean
business, it means redirecting as much of your discretionary spending towards debt repayment as possible. Based on our example,
we know that, as a base, we need to come up with
at least $465 a month to keep up with the minimum requirements. So let’s say that you can afford to devote $700 a month toward debts. Then, that excess payment above
and beyond the minimums due is going to be added to the payment on the highest interest debt. Once you’ve knocked out that first debt, you’re going to reallocate
your payments and go heavy on the second debt. And you’ll repeat this
process until the very end. So, we can see that it’s
called the Avalanche Method because we crush that
biggest interest debt first. The one that’s costing you the most money. And then, afterwards, you’ll find that all the smaller interest debts
get wiped out pretty easily as the monthly payments on
each of them get much larger with the elimination
of each debt before it. Method number two: Debt Snowball. This is often the method favored by most. And it’s success is primarily
achieved by keeping you motivated with what feels
like quicker results. Much like the first
method where we targeted our strongest payment
efforts towards the debt with the highest interest rate, this method, instead,
focuses on wiping out the smallest debts first. So, your new list would be arranged according to their balance,
not the interest rate. And for the sake of this example,
we’ll assume, once again, that you have $700 to
put towards debt payments each and every month with total minimum payments due of $465. This time, you want to
allocate the excess payments towards your tiniest balance first. And that’s going to get
rid of it pretty quick. And that’s exactly why people
favor this method because you get the satisfaction
of what seems like much quicker results. But, mathematically, you end
up paying more in interest with this method. Especially if your largest
debts are also the debts with higher interest rates. But the point of this
method is to build momentum by keeping you motivated. Just like with diets, we’re
much more likely to feel good about sticking to the plan
if we can step on that scale and see big results right away. Likewise, the debt snowball
method makes us feel like we’re shedding the debt
a lot quicker by ditching all the small balances
right from the get-go. And this is where the
name Snowball comes from. You start small and as
you keep rolling through your payments, you make
your way towards tackling the bigger and larger debts. Ultimately, it’s all about
mind set when it comes to dealing with debt. So whichever method makes you
feel good about the process is one that you’re more
likely to stay committed to and that’s what really matters here. And, again, I urge you
to be kind to yourself. Avoiding the issue just
because you feel bad about it is only going to make it worse. So own it and attack and do what you can each and every month to help set yourself up for success. And if you need help, ask for it. I’m here for you too. You can visit my website
at CindyMarques.com to reach out and connect ’cause I’d love to hear from you and it would be my pleasure to help you absolutely nail this. Thank you for watching today’s episode. I’ll be back for more with you next week, so make sure to subscribe
so you never miss a beat. And hey, if you feel like
I said something good, give this video a like and
share it with your friends. Leave comment below and
let me know your thoughts or what else you might
want to hear me talk about. Until next time, guys, good luck.

2 Comments

  • 🙌🏼🙌🏼

  • Some of these facts are scary Cindy! 😭

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