How to Make Debt Relief a Priority During Reno SeasonMay 23, 2018
When it comes to debt relief and the way to deal with your finances, are you asking yourself the right questions? With renovation season on the way, it’s critical to have some self-inspection over your ability to repay debt, and how that might change after completing a renovation.
Renos are a popular summer project for Canadians. A BDO poll from last summer found that those using credit would spend an average of $20,744 on renovations. In addition, respondents also admitted they were willing to sacrifice saving for retirement and paying off debt to renovate.
This can work for some people, but the important thing to do before committing to a renovation project is to create a financial plan. Getting in touch with your ability to repay debt is part of that, especially for the almost half of Canadians who are living paycheque to paycheque. Here are things to consider when creating your plan:
- You first want to make sure you have a renovation budget. The Canadian Home Builders’ Association has a great guide for planning your renovations, including a “Wish List” where you deem upgrades that you “need” and those that you “like”. The latter can be set aside if budgets are limited.
- Set up a timeline that works with your household budget. Are there renovations you need to do this year? Can some of those “I like this, but don’t need it” plans be pushed back while you focus on paying off an existing debt load? Create a list of your priorities and create a timeline with your budget so you are not financially overwhelmed with all the work you wish to do.
- Finally, get a picture of your entire financial life. You still want to prioritize paying off debt in order to meet long-term financial goals. The average renovation debt takes two-and-a-half years to pay off, according to the aforementioned BDO poll. Check out an online debt calculator to see if that length of loan is workable for your situation.
Before committing to a home renovation, you want to make sure you’re making a sound financial decision. Balancing debt relief with upgrades to your home is a consideration that will save you from future stress.
For more things about your finances you should “know before you reno”, listen to this podcast with advice from BDO Licensed Insolvency Trustees (LITs). These include knowing your mortgage payments and how renovations can impact long-term financial goals.