Trying to pay down debt? Even with a plan in place and a commitment to reducing or removing that troublesome debt load once and for all, you may feel like you are not getting anywhere. Before you throw in your debt towel, it’s worth taking a look at your debt repayment strategy.
“One of the keys to paying down debt is to be open to re-tooling your plan when you find that it’s not working. Debt repayment can take several months, if not years, so it is important not to get discouraged and give up,” says Jeff Schwartz, executive director, Consolidated Credit Counseling Services of Canada.
Schwartz continues, “There are lots of ways to go about paying down debt. By the same token, there are lots of practices and habits that can effectively derail or delay your debt repayment plans- and you may not realize it.”
If your goal is to pay down debt, then you’ve probably put every dollar you earn toward that debt right? Not necessarily. While an aggressive plan is good- don’t completely ignore your savings in favour of debt repayment. Even if it is a small amount every month, it is essential you build up an emergency savings fund.
Without an emergency savings account and an unexpected expense occurs, you run the risk of taking on more debt to cover that expense. This could not only derail your debt repayment but leave you even further behind.
Cutting off cash flow
When you are trying to pay down debt, the inclination is to put every single penny you can every month toward the bills. If you don’t leave enough cash flow to cover other monthly expenses, you’ll be forced to rack that debt up again, just continuing the cycle.
The answer here is to set up a detailed budget that covers all of your expenses and leaves room in your cash flow. Yes, you need to make sacrifices if you are trying to pay down debt, but you need to be realistic. The key is creating a habit that lets you spend within your means
The bare minimum
If you’ve got multiple debts, you may be tempted to put what you can on them all, which may result in payments that only slightly over reach the minimum, which isn’t effective in reducing the overall debt.
Credit cards will never be paid off by making minimum payments, as most of that payment goes to servicing the swelling interest charges. Pick your highest interest bearing card, and pay as much as you can towards that one first, while making minimums on the others. This will allow you to pay off your most expensive debt first so you have more for the rest.
You may even try to consolidate your debts on your own-this is a particularly good strategy if you have great credit.
Are you in the grips of a debt cycle that you can’t find your way out of? It’s time to change your path so that you can change the outcome. We can help you with that. Contact one of our trained credit counsellors at or visit our free online debt analysis.