‘Twas the Debt Before Christmas…

If recent news reports about our collective appetite for credit are any indication, Canadians may wake up in the new year with a doozy of a post-holiday debt hangover.

As new or future homeowners, make it your resolution in 2011 to commit to a long-term program of debt and expense reduction. Pay yourself with the savings, either through lump sum payments on high interest lines of credit, your mortgage or your retirement fund.

Here are five simple strategies for increasing your year-end bottom line:

1. Reduce the number of credit card balances you carry

Making minimum monthly payments on credit card balances is the slowest route out of debt. Paying off cards starting with the lowest balance first – and working up to the card with the highest balance – has both psychological and credit rating advantages. This is known as the ‘snowball approach’ to credit card debt reduction. Another tactic is to reduce the number of balances you carry starting with the highest interest rate card first. This is especially important if your highest interest rate card is also the one with the largest balance outstanding.

2. Renegotiate service contracts

Cable, internet and phone companies often release attractive rate packages to lure new customers. If you’ve been a loyal customer of these providers for some time, or your contracts are coming up for renewal, ask them to match competitors’ rates or give you the same packages offered to new clients.

3. Reduce your household energy consumption

Winter started early in many Canadian provinces this year. Simple actions such as weather stripping to cut down on heating costs, and turning off or unplugging appliances and electronic equipment when not in use can help you reduce your monthly utility bills year round. If you buy a qualifying energy-efficient home, you could be eligible for savings on CMHC mortgage loan insurance.

4. Lower your entertainment expenses

Some of the most insidious drains on earned income are miscellaneous entertainment and dining expenses. For example, that daily $4 latte on your way to work adds up to about $80 per month – or more than $900 per year.

5. Get help from a financial planner, tax or mortgage professional

Businesses can’t thrive without financial plans and budgets and neither can family households. If you’re not sure how to budget your monthly expenses, seek advice from a trusted financial advisor. Is your mortgage coming up for renewal? Consult an independent mortgage professional before locking in at your bank’s offered rate. Finally, talk to a tax expert to find out if you’re missing out on important deductions that could lower your taxable income.