How to Plan an Exit Strategy from Debt
One of our most important functions here at One Stop is helping people move on from debt. Whether you’re purchasing a home, a new vehicle or combining your bills into an easy payment, everyone wants to remove themselves from debt at some point.
This isn’t always an easy task. There are lots of details to consider, things you’re not told when you enter debt for the first time.
We do a weekly blast of social media posts entitled Success Stories, where we celebrate the true stories of our clients who have overcome a challenge to get something they need or want.
Why, just last week we helped a single mom in Edmonton finish building a home for herself, her children and her parents. Oh, and she needed a new vehicle, too. We accomplished this by using her existing equity to make the new mortgage a reality.
So now what? What are the next steps?
This is where the exit strategy comes in, although it’s something that’s planned out carefully before anything is signed.
Whether you’re paying down a mortgage, a loan, or a credit card, creating a viable exit strategy is vital to your future. Here’s a few things to consider.
Whether you’ve signed a new deal or you’re coming to terms with your existing debt, the first step is planning a timeline for yourself. When do you want to be debt-free? Clearly the size of your debt will come into play - it’s important to be realistic.
- Homes: 5 years? 35 years?
- Loans: are we talking months or decades?
- Credit Cards: the faster, the better, right?
After you’ve decided on a timeline to pay down your debt, it’s time to craft a strategy and then stick to it. This can involve the frequency or size of your payments or it can relate to other investments you wish to make, like RSP’s or TFSA’s.
Part of our process with clients is planning an exit strategy together, but there’s no reason to avoid a strategy with smaller debts that come and go from week to week.
Factors We Can’t Control
While it’s important to strategize based on your ideal timeline, we encourage people to account for factors and situations that develop out of nowhere. In our time in the loan and alternative financing business, we’ve seen it all.
- sudden illness
- lay-offs and employment issues
- immigration factors that limit an individual’s ability to earn a living
The world is a big, cruel place sometimes, and sometimes it throws things at us that are impossible to foresee. Budgeting your exit strategy with a little breathing room will be a welcome element should something happen.
What Does the Future Look Like?
Imagine what you want your life to look like. Measuring your future will go a long way towards helping you create a timeline and a plan of attack for removing yourself from debt. We all have it in different quantities throughout our life, but with a sound exit strategy, you’re in charge of your debt, and not the other way around.
Need help planning your future? We can help with that, give us a call!