WHAT NOW? (part two)
Last time out, I told you what the first two things are that I will be doing now that I have steady employment again. In a moment, I will tell you what the two other things are. First though, I will reiterate that the first thing I will be doing is enroll in my employer’s investment plan, where they will be matching a certain percentage of what I will be contributing directly from my pay. The second thing on my list is to have an automatic withdrawal set up in my bank account to transfer a reasonable amount of money every two weeks directly into a tax-free saving account.
Now that I have my savings set up to start growing again without taking too much away from take home pay, I can turn my focus toward paying down the debt I amassed while I wasn’t working. In order to do this in the most efficient fashion, I must figure out which debt to pay down fastest in order to pay the least amount of interest across the board.
The three credit cards I have all have varying interest rates on them. Two of them have minimal balances while the third has a sizable balance because I transferred debt to that card for a promotional rate of 1.99%. Without divulging specific figures, let’s break it up this way. Card A and B have balances of $1000; Card C has a balance of $5000, where $2000 of that is my initial balance and the rest ($3000) is my transfer balance getting the special rate. Card A has a rate of 15%; Card B’s rate is 16%; and Card C’s rate on the initial balance is 19%. As I will continue to get the preferential rate of 1.99% for another five months and any money I put on Card C will go toward that balance and not the balance with the higher interest, it makes more sense to pay down Card B first, followed by Card A and finally Card C.
In order to do this right, I will make as large a payment as possible on Card B each month until it is paid out while I continue to make the minimum payments on the other cards.
The next thing I need to do is apply for a loan. Now, it might seem strange that I would want to borrow more money when I am already clearly in enough debt but this is no ordinary loan. It’s a magic loan! No, I’m kidding. There is obviously no such thing as a magic loan. The closest thing to it though is an RRSP loan. Now, I will go over the benefits of RRSP loans in more detail in a future post but the basics of it are that you borrow a certain amount and that amount is invested in RRSP’s. The amount is also a tax shelter. By using a calculator that is readily available online on a number of sites, I can figure out what amount borrowed will get me an amount in income tax return that I can turn around and directly pay out my loan with, or at least the majority of it. It’s like free money.
Well, that should do it. That should put me on track to making things happen for myself. Of course, every road to recovery is different but at least one of these suggestions will certainly help you get started too.
Joseph Belanger is a Toronto-based writer who blogs about film at www.blacksheepreviews.com
