How to Reduce Debt Before You Have KidsApr 21, 2017
Household debt is making it difficult for many Canadians to make ends meet. And in B.C., the cost of financing an education or buying a house can mean skyrocketing debt. For couples who dream of starting a family, they may need to reduce debt ahead of taking on additional child-raising costs.
Here are the costs of raising children in Canada
There was a time when going to school, buying a home and expanding your family were reasonably affordable life goals. But for many Canadians, it isn’t so simple anymore. All of those goals come with their unique set of financial challenges. For many in B.C., especially here in Metro Vancouver, it’s difficult to afford a home in the expensive market without earning a high income—which often requires higher (and more expensive) education. And raising kids in Canada? Well, that can cost in the ball park of $230,000, without factoring in a potential increase in the cost of food. With living expenses, housing, and education costs putting B.C. residents in debt, there isn’t much room for baby. That means many people are having to make difficult choices, and delaying children may be one of them.
The cost of just one of those goals could cause you to seek debt counselling, or visit a Licensed Insolvency Trustee to help reduce debt. Here at BDO Langley, we’re happy to help by explaining every debt relief option available to you.
Before many people take on the expensive endeavour of starting a family and raising kids, they should look into debt relief solutions, such as debt consolidation, to avoid risking their financial security. While the government is taking action to reduce student debt in B.C., the average graduate is leaving school right now with over $30,000 in debt. Prior to the expected cuts in August, B.C. currently has the highest student loan interest rate in the country. Debt consolidation could lower the interest you would pay on all your debts, but when it comes to student loans, you would lose any tax breaks or deductions in the process.
How to balance debt reduction and savings
It can be a lofty goal, but working to reduce your debt now can allow you to consider different opportunities in the future, including having kids. If your debt is high, you can take some steps or seek debt counselling to help reduce your debt efficiently.
When you have high household costs, multiple savings goals, and existing debts to pay off, every penny counts. And the best place to start looking for extra pennies is right in your own budget.
If you aren’t already following a budget, set one up for yourself. Try using a budget strategy like The Life Pie or the 50/20/30 rule, and then use an online budget calculator or mobile app to track your spending. Remember that even when you’re working toward an important goal, being realistic about your timeline is important. You do not want to dedicate so much money to debt reduction or savings goals that you are no longer able to make ends meet.
You can set up itemized savings accounts that help you see your money growing and your goal becoming more of a reality. Besides contributing a set amount of income towards your savings goals each month, remember to also use “found money” wisely. When you get a gift of money, a tax return or other rebate, it’s a good opportunity to grow your savings (or reduce debt).
Solutions to help you reduce debt
For unsecured debts, like lines of credit, student loans and credit cards, you have many options to reduce debt. High interest rates can make it difficult to pay off your debt, but debt consolidation loans can help. By rolling several debts into one loan from a bank, you can make one monthly payment at a lower interest rate (if you aren’t offered a lower interest rate, it helps to shop around). If those unsecured debts are overwhelming you, talk to a Licensed Insolvency Trustee (LIT) about more formal debt relief options like consumer proposals.
Starting a family can be an exciting prospect, and when you have a plan to feel financially secure, you’ll have less stress around the various costs that crop up. Delaying a family because you’re in debt might be a necessity for some Canadian couples, but you can actively reduce your debt every month by examining your budget and seeking debt counselling from an LIT, who will help find the best debt solution for you.
Has debt delayed any of your goals? Tell us about it on Twitter. #LetsTalkDebt #BDOdebtrelief