Debt can loom over everyday life, creating stress and limiting opportunities. If you feel overwhelmed, know that many Canadians face similar challenges. The good news is that with a structured plan and the right approach, you can take control of your finances and work toward living debt-free.
If you want to get out of debt, there is no need to take it on all at once, as you risk getting overwhelmed and discouraged. Consider these steps and how to apply them to your life:
- Assess your debt situation.
- Create a realistic budget.
- Choose a debt repayment strategy.
- Consider debt relief options.
- Build better financial habits.
Face your debt head-on so you can regain your peace of mind and look forward to a healthy financial future.
Assess Your Debt Situation
Before you can start repaying debt, you must fully understand the current state of your finances.
Start by calculating the total amount you owe, including the principal balances, interest rates, and minimum payment obligations for each account. This includes credit cards, loans, medical bills, and any other forms of debt.
Once you have the full picture, organize your debts by priority, focusing on high-interest accounts or overdue payments that may be costing you the most over time. Some debts, such as credit cards or payday loans, accrue higher interest and can grow quickly if not addressed. Flag these as priority items to tackle first, and note payment deadlines to avoid late fees.
Having a clear and detailed snapshot of what you owe gives you the foundation to create an effective repayment plan, enabling you to take control of your finances and work toward a debt-free future.
Create a Realistic Budget
A practical budget is the backbone of any successful debt repayment plan, serving as a clear roadmap to financial stability. Start by tracking your income and every expense to understand exactly where your money is going each month. Are there recurring payments you have overlooked, like streaming services or app subscriptions? About 66% of Canadians have admitted that they have paid for a subscription they had forgotten about.
Identify non-essential expenses and explore areas where you can cut back, such as dining out, entertainment, or impulse purchases. Small changes, like cooking meals at home, can add up in savings over time. Redirect those funds toward high-priority debt.
To make these changes stick, they need to be realistic. Allocating every dollar wisely while ensuring you can still cover necessary living costs, such as rent, utilities, and groceries, allows you to commit to debt repayment long-term. By sticking to a well-thought-out budget, you will not only make steady progress on eliminating debt but also build stronger financial habits for the future.
Choose a Debt Repayment Strategy
Once you have a clear financial picture and budget, apply a repayment strategy that fits your situation.
The 2 most popular methods are the debt snowball and the debt avalanche:
- Debt Snowball focuses on paying off the smallest debts first. This method generates early wins and builds momentum as you move on to larger balances.
- Debt Avalanche emphasizes tackling debts with the highest interest rates first, minimizing the total amount paid over time.
Both approaches are effective. Choose the one that keeps you motivated and moving forward.
Consider Debt Relief Options
When budgets and repayment plans are not enough, it may be time to explore alternative options to ease the burden. Several solutions exist, each catering to different levels of need:
- Debt consolidation loans: Combining multiple debts into 1 loan with a lower interest rate simplifies payments and reduces overall costs.
- Credit counselling and debt management plans: You do not have to figure it all out by yourself. You can seek out professional guidance to restructure payments or negotiate repayment terms with creditors.
- Negotiating with creditors: Many creditors are open to discussing alternative payment plans, particularly if it increases their chances of recouping the owed funds.
Consult with financial experts before engaging in any of these options to ensure you can make informed decisions.
Build Better Financial Habits
Paying off debt is just 1 part of the equation; maintaining financial health is the other.
Resist the temptation to take on new debt unnecessarily—this means avoiding purchases you cannot afford and refraining from overusing credit cards. Instead, focus on building an emergency fund. It provides a safety net for unexpected expenses like medical bills, car repairs, or job loss, so you do not have to rely on credit to get by. Even small, consistent contributions to your savings can add up over time.
Additionally, make it a habit to review and adjust your budget on a regular basis. Set aside time each month to track your income, expenses, and savings goals. This not only keeps your finances on track but also helps you identify areas where you can cut costs or redirect funds toward your future. Taking these proactive steps can help you break the cycle of debt and build a more secure financial future.
Stay Committed to a Debt-Free Future
It can take time and dedication to see results when tackling debt. However, the long-term benefits make this effort worthwhile. You are not alone in this process—we are here to support you every step of the way.
Our primary mission at A.C. Waring & Associates is helping people achieve lasting financial independence. For personalized advice, contact us for a free consultation. Together, we can create a custom roadmap to guide you through your debt repayment journey.
