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Are You House Poor? How to Reduce Debt and Get Relief

Buying your first home is a major life event and source of pride. But when you find yourself unable to manage the expenses, it can quickly become a source of stress. A growing number of Canadians are struggling with the rising costs of home ownership. If this sounds like you, you might be house poor. Here’s how to take control and reduce your debt.

You can easily become house poor if too much of your income is spent on your mortgage payment, taxes, utilities and maintenance costs. When this happens, you can no longer afford essentials, like food, transportation and even prescription drugs. Changing life events like divorce, job loss or illness can be a serious strain on finances, and increase debt significantly if you don’t have an emergency fund.

Being house poor puts your personal and financial well-being at risk, and makes it nearly impossible to reduce debt and save for the future. So it is important to be aware of the risks and have a plan.

Millennials at risk of debt overload

Affordability issues are preventing a growing number of millennials from owning homes. Because a significant number of millennials also  carry student loans and credit card debt, they are at high risk of becoming house poor.

Last year the government created a stress test to ensure that first-time home buyers could afford their mortgages in case interest rates rise. But even if you qualify for your mortgage under the new rules, it can be tricky to reduce your debt because housing costs take up too much of your income.

Don’t wait to take control of your finances

Being house poor isn’t just risky, it’s stressful. If you’re having trouble keeping up with everyday expenses and debt payments, it’s important to take the necessary steps to take back control of your finances:

  • Knowledge is power. Don’t avoid opening bills or reading financial statements out of fear or stress. You need to confront the reality of your situation. Understanding your debt will empower you to come up with a plan to start reducing it.
  • Overhaul your budget. In order to reduce debt, you need to know how dollars flow in and out of your bank account. So make a list of all of all of your expenses for each month. You will soon know whether or not you are truly house poor, or just need to change your spending habits.
  • Cut your expenses. Once you’ve done a thorough review of your budget, you’ll quickly know where (or if) you can cut back. Trimming your expenses even a little bit can make a difference in your ability to make ends meet.
  • Increase your income. After reviewing your budget and cutting non-essentials, you might still be coming up short. If so, there are ways to generate more income. You can take on a second job or start a side hustle. You might also consider sharing your home to decrease your debt load.
  • Consider next steps. Even after you have done everything you possibly can, it still might not be enough. Consider other options like downsizing, relocating to a less expensive location or opting to rent instead of own. You can also speak with a Licensed Insolvency Trustee to explore solutions that will help eliminate your debt and increase your financial security.

Ultimately, your home should be a source of pride and joy, but this isn’t easy when you’re struggling to reduce your debt and manage your housing costs. Take some of the steps we’ve discussed in this post to take back financial control so that you can make the best decisions for the future.

Are you a millennial struggling to reduce debt and becoming house poor? Share your story on Twitter #LeaveDebtBehind #FirstTimeBuyer #MillennialDebt

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