How to Start Your Family Debt Free

Millennials have received their fair share of criticism in the media. They're often unfairly portrayed as refusing to grow up, missing many of the milestones their parents have reached already as they get older, such as buying a home or starting a family. But it will come as no surprise to anyone in that age group that couples in their 20s and 30s are delaying having a family because they're worried about money.

There are plenty of reasons for money worries: uncertain job prospects, a shaky economy, astronomic real estate prices that have raised the barrier for first-time homebuyers. But among them all, debt remains one of the biggest obstacles to young couples who want to start a family. And it's hard to blame them. Non-mortgage debt has ballooned to an average of $20,000, including a mixture of credit cards, student loans, and payday loans.

Aspiring parents want to make sure they can give their kids everything they had growing up and more. If that means waiting a few years, they're willing to do it. But if that's the situation you find yourself in, you know you need a plan to put yourself in a better financial position.

With that in mind, these are some of the strategies you can employ to fix your finances sooner so that you can start making your life goals a reality.

#1 Debt Consolidation Programs

When you owe money, interest charges get taken off the account first, meaning less of your payment goes toward the principal. That keeps you in the red longer - and on and on it goes. A Debt Consolidation Program is a way to get the interest rates lowered - or reduced to zero. It's an intervention that can make a huge difference.

With a DCP, a certified Credit Counsellor from a nonprofit credit counselling agency negotiates with your creditors for lower interest rates. They allow you to make a single, lower monthly payment on all your unsecured debts, and they can help you with a broader financial plan, such as budgeting and tracking your spending.

If a DCP sounds like it could help you, you can work with Credit Counsellors from a non-profit credit counselling agency like Credit Canada.

#2 Debt Consolidation Loans

A debt consolidation loan involves taking out a new loan to pay off all your various other accounts like credit card bills. What makes a debt consolidation loan a feasible option? The idea is that you can replace high interest rates with lower ones, and roll all of your various payments into one so that you don't forget any.

The downside is that they may not be easy to qualify for. Lower interest rates require a better credit rating, which may be difficult if you're overburdened already.

#3 Consumer Proposals & Bankruptcy

These are insolvency procedures that release you from your debt without paying all of it back. In bankruptcy, you will have to liquidate certain assets to repay a portion of what you owe to creditors. In a consumer proposal, a large portion of your debt is forgiven, and you repay the rest in monthly payments.

The big problem with consumer proposals and bankruptcy is that they significantly impact your credit rating. If part of your family plan is buying a home, filing for either of these processes will set your plans back by years. It's not impossible to get a mortgage, but your interest rate will likely be higher, and you will have to wait a few years.

All three of these strategies can help you get your finances back on track sooner so that you can move on with your life and start a family without it looming over your head.