How to survive the unexpected, chapter 4: Managing debt

You thought you could pay off your student loans in record time, but your internship was postponed. Your work hours were cut and it's not going to get any better. You thought you were about to enter the workforce, but there aren't as many opportunities anymore. If your finances have taken a hit in the pandemic, we can help. Before taking on yet another roommate to reduce your expenses and pay off your debt, read on for tips to help you take control of your finances.

Tackle your debts one at a time

  1. Start by making a list every single one of your debts: student loan, credit cards, car or A/C financing, money you owe a friend for last week’s groceries. This step is a must in order to give you a full picture of the situation and help you make informed decisions.
  2. Look at how much interest you’re paying on each debt. You’ll find that information on your account statements or through your online banking site.
  3. Determine how much you can pay back by first creating a budget.
  4. Reduce your interest charges by paying off the debts with the highest interest rates first.

Get a handle on your student debt

Once you’ve graduated, you have a 6-month grace period before you have to start paying back your student loans. But if you can afford it, it’s best to pay it off earlier rather than later, to minimize your interest payments. The good news is that one of the relief measures announced during the pandemic (effective April 1, 2020) was 6-month deferred repayment of government-guaranteed student loans. Take advantage of this to pay off your most pressing debts.

After this grace period, the same principle applies: pay off the debts with the highest interest rates first.

Good to know! Besides generally being lower, interest on government-guaranteed student loans is eligible for a non-refundable tax credit. And that can reduce your taxes.

To find out more about paying off student loans, go to this page - External link. This link will open in a new window..

Limit your use of credit

Credit cards are a very convenient way to pay for purchases. But unlike fixed-amount loans, if you don’t pay the full balance every month, they can easily become a financial burden; the interest, which is usually higher, accumulates fast. So be careful!

Loans, lines of credit and other point-of-sale financing usually have lower interest rates than credit cards. Comparison shop before you decide which product is right for you.

Astuce  Tips to minimize interest on your credit card:

  • Pay your card balance in full every month before the due date.
  • If you’re not able to pay the whole balance, at least make the minimum payment to maintain a good credit score. You’ll still have to pay interest on the total balance, though. And keep in mind that if you don’t make the minimum payment - External link. This link will open in a new window., you could be paying off your debt for years to come!
  • Avoid making cash advances on your credit card, because you’re charged interest right away.

And if you’re prone to impulse spending - This link will open in a new window., read our tips to help you manage it.

Plan your purchases around what you can afford

It’s not unusual to have debt. Some debt is necessary (to buy a house, for example) but other kinds, not so much (to buy yet another pair of shoes, say!).

If there are projects you’re not able to achieve short-term, there’s nothing stopping you from opening a savings account and setting concrete goals to achieve them. But start by paying your regular expenses (like rent and groceries) and tackling your most pressing debts.

Questions? Contact one of our advisors! They’re here to make recommendations based on your situation and help you with your debt repayment strategy.

Desjardins is here for you

Our 18- to 30-year-old members are eligible for several different support measures, including payment deferral - This link will open in a new window. and over-the-phone psychological and legal support. Take a look to see what applies to you at desjardins.com/covid-19/youth - This link will open in a new window..

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