How can I reduce debt?

Dealing with debt is stressful and expensive, but wishing that it would go away isn’t very effective. To reduce debt you need a plan with specific steps and accountability.

how can i reduce debt

“Debt reduction starts with a strategy, followed by commitment and will power to see it through. How you repay your debt will depend largely on your personal circumstances, but most successful debt repayment strategies have similar elements,” says Jeff Schwartz, Executive Director, Consolidated Credit Counseling Services of Canada.

Have you had enough of carrying debt? Want to determine what the best plan to pay your debt off is? Call one of our trained credit counsellors at or get started with our free online debt analysis.

When attacking your debt, here are some tips on how to get it done most efficiently.

Prepare mentally

Before you even start drafting your plan to reduce your debt, take some time to prepare yourself mentally. How did you end up in debt in the first place? Have you engaged in the buy-now-pay-later mentality too much and now have a debt load as a result? Have you chronically overspent because you didn’t have a budget to live by?

Paying down debt can take some time and involves a daily commitment. At its core, paying down debt and remaining debt-free has a lot to do with your attitude towards spending and saving. Prepare yourself for the fact that this is going to take time and hard work and that it isn’t going to be easy- but that the achievement at the end of your journey is going to be worth it.

Remind yourself of your goals frequently and celebrate your successes along the way. Similarly, if you do get off track, don’t write off your debt repayment. Determine what went wrong and figure out how to correct it.

Tally your debts

In this initial stage of debt repayment planning, it is essential that you be as accurate as possible. That means you need to lay all of your debt information out on the table-literally. Your plan will only be successful if you have a comprehensive picture, because it will let you be able to budget accurately. Get out all of your statements, receipts and other documentation for reference.

“If you don’t have a clear idea of what your debt load is at the beginning of the debt repayment process, it may be your very first barrier to success. You may find down the road that you aren’t reaching your goals, and it might be because of this mistake right from the beginning. Sit down with all of your debts. This can be a little shocking when you first add everything up, but maybe this is the reality check that can jumpstart your debt repayment plan,” says Schwartz.

Look at your income

In order to pay down your debt, you are going to set up a budget (which we will touch on below). Before you do that, what is your household income? If you are an hourly or part-time employee, use an average of about three month’s earnings for your salary. It is always a good idea to estimate low, just to give yourself wiggle room.

Debt repayment options

Now that you have an idea of what your debts and your income look like, what is the likely debt solution that is going to work for your situation? If you are able to make payments, but haven’t been organized with a budget to keep your spending under control, you can likely DIY your debt consolidation. If you’ve been timely with your payments and have a decent credit score, you may be able to get a debt consolidation loan from your financial institution, which will let you benefit from combining your debts into one payment, which will save interest, boost your cash flow and allow you to pay your debt down quickly.

If you are struggling to make payments, have the income to do so, but would benefit from a longer timeframe to accomplish this, than a Debt Management Program may be the way to go.

Other debt relief solutions when you’ve fallen behind on your payments can include a consumer proposal or even in dire circumstances, bankruptcy.

It is a good idea to consult with a financial professional to determine which debt repayment strategy is the right solution for you.

Build a budget

Regardless of your eventual debt repayment, you need a budget to pay down your debt and achieve financial harmony.

List all of your monthly expenses in detail, including savings. Determine how much you can affordably pay towards debt given your current situation. You may have to reduce some spending in other areas to get the desired amount that you’ve determined will be effective and affordable to get your debt down.

Once you’ve got a number to work with, you’ll have a good idea whether you can manage DIY debt repayment.

Different strategies

For DIY debt repayment, either consolidate your cards onto a single card via balance transfer or pick a single card to attack first. You are better off directing as much as you can to one place, because your payment will actually eat up more principal and result in less interest that way.

There are a couple of ways to approach it. You can either pick the card with the highest interest rate because that is the card that is costing you the most money. Another approach is to pick your smallest balance card first because getting one out of the way quickly can be motivating to keep on going.

Commit to debt free living

Once your cards are paid off, you need to take active steps to ensure that you don’t fall into the debt cycle again. Make sure that you are putting money aside every month for savings so that you don’t have to turn to credit in the event of an emergency.

You don’t necessarily have to close your cards down as you pay them off, especially if you’ve got a card that you’ve had for a long time. A lengthy credit history can be helpful in boosting your credit score. Do put cards away out of your wallet, so that you don’t rack them up again.

Regard your budget as the boss in your household. If you don’t have cash earmarked for certain expenses, you put them off until you can manage them within the framework of your budget.

To learn more about how you can reduce debt, call us at [PHONE_NUMBER] or visit our free online debt analysis.