Trying to pay down your debt, avoid these mistakes

Have you decided to pay down debt but despite your best efforts, your debt problems just won’t go away? You may want to revisit how you are paying down your debt.

“There are many different ways to reduce your debt load. There is no “wrong” way or “right” way, as debt repayment depends largely on individual circumstances. However, there are some common mistakes that people make that prevent them from being successful,” says Jeff Schwartz, executive director, Consolidated Credit Counseling Services of Canada.

Is your debt problem growing? Not sure what to do about it? Contact one of our trained credit counsellors to learn how you can effectively pay down your debt and move forward with debt-free living. Call us at or get started with our free online debt analysis.

Having trouble paying down your debt? Chances are you are making one of these common mistakes:

Why did you accumulate debt in the first place?

It’s all well and good to decide that you are going to pay down your debt, but it would be more effective, to begin with trying to determine how you got into debt in the first place. If you can address the “why” behind your debt, you can tailor your debt repayment plan more specifically, as well as avoid the likelihood that you’ll fall back into debt in the future.

There are common reasons that people fall into debt. Do you have a budget? Did you lose your job or experience another life event that interrupted your income? Are you someone who engages in retail therapy?

There are additional solutions that you’ll need in addition to your debt repayment in order to pay your debt down effectively; you need to set up a budget, using a system that works for you. If you are spending beyond your means with retail therapy, find other ways to feel good that are free (or nearly free). If job loss or emergency spending got you into trouble, focus on building up emergency savings and learning about savings options.

Only making minimum payments

While making payments on time is good for your credit history, it isn’t going to do much to erase your debt if you are only making the minimum. That is because most of your minimum payment is going towards interest. Very little is actually going towards the principal of your debt. Each month that you carry a balance, the interest continues to accumulate.

Even if you are making a little more than the minimum on your cards, there are more effective ways to pay down your debt.

“If you are putting small payments down on multiple cards, you are better off to try to get more mileage out of your debt payments through consolidation. That means you make a single payment, where more is going to go down on the principal of the debt, “says Schwartz.

Not having savings on hand

Do you have emergency savings on hand? If you don’t, you will be forced to turn to debt to cover costs in the event of an emergency. You rack up debt again, erasing all the hard work that you’ve done to date.

As part of your budget, make sure that you have money allocated every month towards your savings. It might seem counterproductive to when you are trying to find as much money as you can every month to pay down your debt, but even a small amount of savings can save you from debt disaster down the road.

You lack commitment

Do you decide that you are going to pay down your debt, only to whip out your credit cards to join friends for dinner or spend on other items that aren’t really in your budget?

Money management is based in behaviour, which means that you need to alter your behaviour towards spending and saving in order to pay down your debt. You will need to sacrifice and you will need to be able to stick to your plan in the long term in order to see results.

Build small rewards into your debt repayment plan, so that you can stay motivated and committed to paying down debt until it is gone.

You aren’t organized

Being organized is an important part of paying down debt. You need to know how much debt you have and when payments are due. You also need to track your spending as part of your budgeting.

Tracking your spending and being proactive in your debt payments means that you’ll save money (avoiding late fees or overspending on items that you don’t need).

You live in a debt cycle

Maybe you’ve had success in paying down your debt, but as soon as it is paid down you rack up the credit cards again. This is one of the challenges with revolving credit. It is convenient, but it can also be tempting to run it up over and over again.

Just as you plan your spending with your budget, plan your credit use. Only use credit for a purchase that you know that you’ll be able to pay off in a month’s time so that you don’t run your cards up again.

You don’t have a plan

You will be more successful with paying down debt if you have a plan in place. As we mentioned, consolidation is one great approach. If you are able, do a balance transfer to a single card and direct your payments there.

You can also use the snowball approach, where you focus your extra money on paying down your smallest debt first. As your debt gets paid down, your payment momentum grows (i.e. the snowball) and you’ll be able to use that extra money towards your next largest debt, and so on.

Are you ready to reconsider your debt payment strategy so that you can get rid of your debt once and for all? Call us today at or check out our free online debt analysis.

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